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Analysis of the Upper North Island Supply Chain Strategy

Working Group Options for moving freight from the Ports of

Auckland

David Moore, Gary Blick and Preston Davies

11 June 2020 (reissued 26 June)

1.

Disclaimer: This report was prepared by Sapere Research Group, independent consultants commissioned by the Ministry of Transport. It does not represent the Ministry’s views.

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Contents

Glossary of Abbreviations ......................................................................................................................................................... 6

Glossary of Terms ......................................................................................................................................................................... 7

Executive summary ...................................................................................................................................................................... 9

1. Introduction ........................................................................................................................................................................ 18

1.1 Ongoing consideration of North Island supply chain ................................................................. 18

1.2 This study was intended to be in partnership with officials ..................................................... 20

1.3 Structure of this report ............................................................................................................................ 23

2. Advancing decision making for a mega-project .................................................................................................. 24

2.1 Reflecting a prospective New Zealand mega-project ................................................................. 24

2.2 How the workstreams advance our knowledge ............................................................................ 25

2.3 How would we consider decision making for a mega-project? ............................................. 25

2.4 Important caveats ...................................................................................................................................... 28

3. Outlook for freight growth and vessel size ............................................................................................................ 29

3.1 Forecasting growth in container freight ........................................................................................... 29

3.2 Sizing the future freight task ................................................................................................................. 31

3.3 The container forecast is the most critical ....................................................................................... 32

3.4 Outlook for larger container vessels .................................................................................................. 33

3.5 Important implications for POAL ......................................................................................................... 33

4. Ports of Auckland – the base case ............................................................................................................................. 34

4.1 Plans to address constraints and increase capacity ..................................................................... 34

4.2 Thirty years of port capacity plausibly remains ............................................................................. 35

4.3 The POAL base case as a baseline to test other options ........................................................... 36

4.4 A simplifying assumption of further port expansion to meet 60-year needs ................... 36

5. Overview of options and infrastructure ................................................................................................................... 39

5.1 Option set ..................................................................................................................................................... 39

5.2 Port capacity assessments...................................................................................................................... 39

5.3 Schedule of landside infrastructure.................................................................................................... 50

5.4 Summary of infrastructure costs ......................................................................................................... 51

5.5 Implications for phasing of costs ........................................................................................................ 52

6. Major analytical findings from the cost benefit analysis .................................................................................. 53

6.1 Taxonomy of costs and benefits aligns with previous work ..................................................... 53

6.2 All options result in net costs to society relative to the status quo; Manukau favoured

.......................................................................................................................................................................... 55

6.3 Low operating costs main reason why Manukau stands out ................................................... 55

6.4 Land redevelopment benefits uniform across options; Manukau and Firth of Thames

have additional benefits ......................................................................................................................... 55

6.5 Operating costs dominate for existing port options ................................................................... 58

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6.6 Amenity gains to households dominate land redevelopment benefits; ‘new port’

options have additional operational benefits ................................................................................ 58

6.7 Environmental and transport safety externalities ......................................................................... 60

6.8 Sensitivity and scenario testing show discount rate and timing most influential ........... 61

6.9 Hastening the relocation of freight operations improves BCRs but worsens net

benefits for all but the Manukau option .......................................................................................... 61

6.10 Real options approach has potential to alter results but quantitative modelling not

possible in timeframe .............................................................................................................................. 63

7. Alternative land use at POAL ....................................................................................................................................... 65

7.1 Relating social licence to amenity from alternative land use................................................... 65

7.2 Modelling congestion impacts ............................................................................................................. 71

7.3 POAL congestion effects may be unacceptable without shifting more freight to rail ... 72

8. Comparison with Working Group findings ............................................................................................................ 74

8.1 The Working Group identified Northport as the preferred location; Tauranga the

worst, Manukau not modelled ............................................................................................................. 74

8.2 Comparisons at analytical level reveal key differences in characterisation of benefits

and calculation of costs .......................................................................................................................... 75

8.3 Several other material differences: ..................................................................................................... 76

8.4 Some gaps could get bigger after trying to equalise the respective study periods....... 79

9. Estimating supply chain costs ...................................................................................................................................... 81

9.1 A wide range for cost per TEU .............................................................................................................. 81

9.2 Reconciling results of cost per TEU with the CBA ........................................................................ 83

9.3 Cost per TEU change over time ........................................................................................................... 83

10. Regional economic and social effects ...................................................................................................................... 85

10.1 Regional impacts cannot be equated to CBA results .................................................................. 85

10.2 We estimated a modest package of regional economic impacts .......................................... 86

10.3 Social analysis not ‘full-blown’ impact analysis, but identifies gaps, areas for further

work ................................................................................................................................................................ 89

11. Financial implications for port owners ..................................................................................................................... 90

11.1 POAL is worth almost $1 billion to Auckland Council ................................................................ 90

11.2 POAL profit and dividend to Auckland Council ............................................................................. 91

11.3 The present value of Auckland’s freight is $1.765 billion to another port company ..... 92

11.4 Capitalised value of the infrastructure investment varies up to over $4 billion ............... 92

11.5 New port options are not commercially viable ............................................................................. 93

11.6 The two-port model may be mutually advantageous but at the cost of complimentary

investment .................................................................................................................................................... 94

11.7 It is unlikely the three ports can work to find a solution ........................................................... 94

11.8 The land value released to Auckland Council may be lower than expected ..................... 95

11.9 All scenarios reduce competition but one ....................................................................................... 96

11.10 Government funding and financing ................................................................................................... 98

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12. Supply-chain stakeholder perspectives ................................................................................................................ 101

12.1 Northport does not make intuitive sense ..................................................................................... 101

12.2 Manukau’s proximity to land-side supply chain is an advantage ....................................... 102

12.3 Firth of Thames is favoured by shipping companies................................................................ 103

12.4 Tauranga may provide port scale efficiencies ............................................................................. 103

12.5 Reducing the number of ports raises concerns .......................................................................... 103

12.6 Shipping routes could adjust to any port option ...................................................................... 103

12.7 General cargo and bulk will need to stay in Auckland somewhere.................................... 103

13. Resource consenting issues ....................................................................................................................................... 105

13.1 Assumptions ............................................................................................................................................. 105

13.2 Consenting expansion of Ports of Auckland ............................................................................... 106

13.3 Northport expansion ............................................................................................................................. 107

13.4 Port of Tauranga expansion ............................................................................................................... 107

13.5 The Firth of Thames sites ..................................................................................................................... 108

13.6 Manukau Harbour sites ........................................................................................................................ 109

13.7 Consenting costs and timeframes ................................................................................................... 111

13.8 Directive policies in the NZCPS almost prevent new ports in the identified locations

....................................................................................................................................................................... 112

13.9 Alternative planning routes require legislative change ........................................................... 113

References .................................................................................................................................................................................. 115

Appendices

Appendix A: Economic analysis comparisons 117

Appendix B: CBA sensitivity analyses 120

Appendix C: NZ Coastal Policy Statement 123

Tables

Table 1 Comparison with Working Group findings across five options in scope ............................................. 15

Table 2 Criteria for narrowing long list of options ........................................................................................................ 26

Table 3 Outstanding data issues .......................................................................................................................................... 28

Table 4 Container freight forecast scenarios for Ports of Auckland – compounding annual growth rates

........................................................................................................................................................................................................... 30

Table 5 Container freight forecasts for Ports of Auckland – size of future freight task ................................. 31

Table 6 Bulk freight forecasts for Ports of Auckland – size of future freight task ............................................ 31

Table 7 Vehicle import forecasts for Ports of Auckland – size of future freight task ...................................... 31

Table 8 Summary of landside infrastructure projects .................................................................................................. 50

Table 9 Summary of infrastructure costs by option (real, 2019, $b) ...................................................................... 51

Table 10 Cost and benefit categories ................................................................................................................................. 54

Table 11 CBA results (PV, $m) ............................................................................................................................................... 57

Table 12 CBA components, calibrated projection (PV, $m) ....................................................................................... 57

Table 13 Composition of benefits, Calibrated forecast (PV, $m) ............................................................................. 59

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Table 14 60-year additional environmental emission relative to baseline (tonnes) ........................................ 60

Table 15 60-year additional road safety incidence relative to baseline ............................................................... 60

Table 16 CBA sensitivity results for shortened construction and transition, Calibrated forecast (PV, $m)

........................................................................................................................................................................................................... 62

Table 17 CBA sensitivity results for shortened construction and transition, Officials' agreed forecast

(PV, $m) .......................................................................................................................................................................................... 62

Table 18 POAL redevelopment land-use assumptions................................................................................................ 65

Table 19 Summary of relevant studies valuing externalities ..................................................................................... 67

Table 20 Key parameters for estimating amenity value range ................................................................................. 69

Table 21 Movements from POAL site in passenger car units, in 2048 (PCUs per hour, two way) ............. 73

Table 22 Average Travel Speeds in the Auckland CBD, 2036 (km per hour) ...................................................... 73

Table 23 Summary results of EY analysis, 2020 to 2050 (PV, $m) ........................................................................... 74

Table 24 Comparison with Working Group findings for economic analysis of Northport (PV, $m) ......... 75

Table 25: Cost $ per TEU (Calibrated) with externalities but excluding infrastructure, (real, 2019)........... 82

Table 26: Supply chain infrastructure costs $ millions p.a., 60-year analysis period, (real, 2019) .............. 82

Table 27: Cost $ per TEU (calibrated) with externalities and infrastructure costs, (real, 2019) .................... 82

Table 28: Total Capital Costs in the 2020 and 2030 Decades (real 2019 dollars) ............................................. 83

Table 29 Results from input-output model for period 2020-2079 (nominal $m) ............................................ 86

Table 30 Annual GDP impact (nominal $m) .................................................................................................................... 87

Table 31 Measures of QB and QL ........................................................................................................................................ 89

Table 32 Conclusions on market value for POAL (PV, $m) ........................................................................................ 91

Table 33 POAL’s comprehensive income which belongs to Auckland Council (nominal $m) ..................... 92

Table 34 Present Value of port infrastructure investment required to handle Ports of Auckland freight

($m) .................................................................................................................................................................................................. 93

Table 35 Impact of options on port competition .......................................................................................................... 97

Table 36 Price changes implied by reduced competition .......................................................................................... 98

Table 37 Consenting costs and timeframes .................................................................................................................. 112

Table 38 Comparison with Working Group findings for economic analysis of Tauranga (PV, $m) ....... 117

Table 39 Comparison with Working Group findings for economic analysis of Firth of Thames (PV, $m)

........................................................................................................................................................................................................ 118

Table 40 Comparison with Working Group findings for economic analysis of split Northport &

Tauranga (PV, $m) ................................................................................................................................................................... 119

Table 41 CBA lower discount rate sensitivity results, Calibrated forecast, PV, $m ........................................ 121

Table 42 CBA lower discount rate sensitivity results, Officials’ agreed forecast, PV, $m ............................ 121

Table 43 CBA higher discount rate sensitivity results, Calibrated forecast, PV, $m ...................................... 122

Table 44 CBA higher discount rate sensitivity results, Officials’ agreed forecast, PV, $m .......................... 122

Figures

Figure 1 Project workstreams and specialist consultants ........................................................................................... 21

Figure 2 CBA structure.............................................................................................................................................................. 26

Figure 3 Container freight forecast scenarios for Ports of Auckland – comparison of trend growth ...... 30

Figure 4 Ports of Auckland plan for expanded container terminal operations ................................................. 34

Figure 5 Freight forecasts with estimates of Ports of Auckland operating capacity ....................................... 35

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Figure 6 POAL – A concept for required container terminal area, assuming unconstrained expansion to

2079 ................................................................................................................................................................................................. 38

Figure 7 Northport expansion – concept layout for forecast freight task, 2079 ............................................... 41

Figure 8 Port of Tauranga expansion – concept layout for forecast freight task, 2079 ................................. 43

Figure 9 Northport expansion under split option – concept layout for forecast freight task, 2079 ......... 45

Figure 10 Port of Tauranga expansion under split option – concept layout for forecast freight task,

2079 ................................................................................................................................................................................................. 46

Figure 11 A new port on the Firth of Thames – potential sites (concept only) ................................................. 47

Figure 12 A new port on Manukau Harbour – potential sites (concept only) .................................................... 48

Figure 13 Summary of infrastructure costs by option ................................................................................................. 51

Figure 14 Cost breakdown by option, Calibrated forecast (PV, $m) ...................................................................... 58

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Glossary of Abbreviations

Abbreviation Stands for

AC Auckland Council

AT Auckland Transport

AUP Auckland Unitary Plan

BOPRC Bay of Plenty Regional Council

CBA Cost Benefit Analysis

GDP Gross Domestic Product

MACA Marine and Coastal Area (Takutai Moana) Act

MBIE Ministry of Business, Innovation and Employment

MMH Marsden Maritime Holdings Limited

MoT Ministry of Transport (New Zealand)

NRC Northland Regional Council

NZTA New Zealand Transport Agency

POAL Ports of Auckland Limited

PoT Port of Tauranga Limited

RMA Resource Management Act 1991

TEU Twenty-foot Equivalent Unit

UNISCS Upper North Island Supply Chain Strategy

WTA Willingness-to-accept

WTP Willingness-to-pay

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Glossary of Terms

Terms Stands for

Berthage The number, length and configuration of a port’s container and bulk

berth spaces.

Bulk cargo

Strictly speaking, bulk cargo is cargo that is transported unpackaged

in large quantities. It refers to material in either liquid or granular

form such as petroleum or grains typically dropped or poured

directly into a bulk ship’s hold. Smaller quantities can be boxed (or

drummed) and palletised (break bulk). Bulk cargo is classified as

liquid or dry. In this report, we use the term ‘bulk cargo’ loosely to

describe any merchandise that is not moved by container. As we

have used it, the term includes a range of cargoes, including bulk

liquids (e.g. crude oil), unprocessed logs, and cars & scrap steel,

coal, grain, flour & cement.

Container cargo Any merchandise that is loaded into and shipped in an intermodal

shipping container.

Distribution network

The land transport infrastructure, and associated inland ports and

distribution facilities, that service a port. Includes both road and rail

networks but not coastal shipping.

Exports Cargo that leaves a New Zealand port bound for another country.

Imports Cargo that enters a New Zealand port from another country.

Inland port

A cargo consolidation and distribution facility located inland of a

port and generally linked to it via a rail line. Examples in New

Zealand include Metroport and Wiri Inland Port in Auckland. (Note

the Working Group referred to a Distribution Centre that is a similar

but not completely synonymous concept.)

Intermodal container

An ISO standardised shipping container that can be moved between

different freight modes (sea freight, road, rail) without having to

unload and re-load its contents. See Twenty-foot Equivalent Unit

(TEU)

Land transport infrastructure

The distribution networks, including road, rail and pipelines that

move cargo between the port and its final origins or destinations

inland of the port.

Outside-port cargo Cargo moves into the port from sea and out by land, or vice versa.

Includes imports, exports, and domestic coastal cargo.

Port access The depth of a port’s channels and berths.

Port exchanges Cargo that both enters and exits the port by sea. Includes import

and export transhipment and international transhipment cargo.

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Terms Stands for

Port infrastructure The capital assets of a port, including the port access channels,

berthage, handling (e.g. cranes) and storage facilities.

Storage

The container and bulk storage capacity of a port, including the

total area of storage yards and the technology used to store and

move cargo

TEU

A standard measure of intermodal container cargo volume that

allows for conversion between containers of different sizes. Stands

for ‘Twenty-foot Equivalent Unit.’

Throughput The total amount of cargo that is loaded or discharged at a port.

Includes both outside-port cargo and port exchanges.

Upper North Island Ports

For the purposes of this study, the UNI ports are defined as: Ports of

Auckland (POAL), Port of Tauranga (POT), Northport, and the docks

near Whangārei at Refining NZ’s refinery.

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Executive summary

This report responds to Cabinet’s request to officials for further advice on Upper North Island Supply

Chain Strategy (UNISCS), following receipt of the Independent Working Group report in December

2019. Cabinet had appointed the Independent Working Group in September 2018 to review the Upper

North Island freight and logistics sector and to advise on a potential future location or locations for

Ports of Auckland Ltd (POAL), with serious consideration to be given to Northport.1

The Working Group’s report concluded that the POAL’s freight operation on the Waitematā Harbour

“is no longer economically or environmentally viable” and that the freight operations should be

progressively closed with future freight shipping handled by the development of Northport and the

continuation of Tauranga’s existing expansion plans.2 The Working Group’s report was accompanied

by an economic analysis of scenarios over a 30-year timeframe, comprising different infrastructure

configurations, including full and partial moves to Northport and/or the Port of Tauranga.

While noting that POAL is not viable as the Upper North Island’s key import port in the long term,

Cabinet sought further advice to inform future decisions on the UNISCS, including an assessment by

officials of the Working Group’s recommended scenario and the other scenarios it considered.3

This commissioned report by Sapere integrates analysis and findings from a consortium of consultants

with expertise in port marine engineering, port planning, rail engineering, supply chain modelling,

traffic modelling, coastal processes modelling, resource management planning and cost benefit

analysis. These specialist inputs are incorporated into an economic assessment framework over a 60-

year timeframe, which is appropriate when considering any investment in very long-lived

infrastructure. The commissioned analysis has been required to: (a) assume the relocation of all freight

operations from POAL; and (b) consider five options for relocation:

• Northport expansion

• Port of Tauranga expansion

• a shared increase in capacity at both Northport and Port of Tauranga

• a new port (greenfield site) on the Firth of Thames, and

• a new port (greenfield site) on the Manukau Harbour.

Much of the research and analysis has focused on addressing two key questions.

1. When do the freight activities of POAL need to move?

2. Where should the freight activities move to? (with regard to the five defined options)

1 See https://www.transport.govt.nz/assets/Uploads/Our-Work/Documents/cc9d34704a/UNI-Cabinet-Paper-and-

Terms-of-Reference_no-redactions.pdf 2 See https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/1.-MOT10025-

UNISCS-Final-Report_final_8-11-19.pdf 3 See https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/CAB-19-MIN-

0647-Minute-002-MarkUp-30012020-Redacted.pdf

https://www.transport.govt.nz/assets/Uploads/Our-Work/Documents/cc9d34704a/UNI-Cabinet-Paper-and-Terms-of-Reference_no-redactions.pdf


https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/1.-MOT10025-UNISCS-Final-Report_final_8-11-19.pdf


https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/CAB-19-MIN-0647-Minute-002-MarkUp-30012020-Redacted.pdf


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Key findings

When does the freight port need to move?

1. The POAL freight operation is constrained on several fronts, including container terminal

capacity and the berths and channel access to accommodate larger container vessels. Plans to

address these constraints rely on resource consents being obtained in the near term.

2. Assuming the necessary consents can be obtained, the container terminal may have sufficient

capacity for around 30 years under reasonable assumptions about freight growth. At that point,

a substantial amount of further land reclamation in the Waitematā Harbour will be necessary.

3. Long lead times for planning, consenting and constructing port capacity elsewhere mean that

there is shorter window of time for a decision about the long-term strategy to future proof port

capacity. That window is approximately 10-15 years. Delays in a decision will make an eventual

shift more difficult if existing options are diminished by other developments.

4. Port planners with international experience advise that it is important to identify the future

freight volume at which the pre-determined long-term relocation plan would be triggered. This

volumetric trigger approach acknowledges the uncertainty of long-run forecasts and allows for

some flexibility to react to sustained upside or downside surprises in trend growth of freight.

5. Traffic congestion on Auckland roads is not a key factor in a decision to relocate the port freight

operations. Modelling shows that average speeds in the city centre are likely to decrease over

time, with port-related traffic being a minor contributor. Future congestion in the city centre is

unlikely to improve in the event of a port relocation, allowing for the resulting redevelopment

with a plausible mix of alternative residential, business and public uses on the waterfront land.

Where should the freight port move to?

A gateway test of sufficient long-term capacity

6. The gateway test is whether an option can future proof the Upper North Island supply chain by

providing long-term capacity to accommodate the future freight task. Given the scale of

investment and the long-lived nature of port assets, the test used here is a minimum of 60 years

of capacity to handle current POAL freight volumes, allowing for a reasonable rate of growth.

7. Neither Northport nor the Port of Tauranga, on their own, can provide sufficient capacity to

accommodate the long-term, 60-year freight task.

8. Northport could provide sufficient berth capacity until around 2060, which is not materially

longer than the estimated 30-year capacity at POAL. To accommodate the freight task for the

minimum test of 60 years, marine and coastal engineers conclude that Northport would need a

2km long quay, involving dredging and reclamation that expands beyond identified constraints

to the west (residents, wetlands) and to the east (into Refining NZ’s liquids berths and well

beyond) with significant impacts on coastal processes affecting the nearby coastline and

channel.

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9. The Port of Tauranga would need significant expansion, into industrial areas on each side of the

estuary channel, to accommodate its own long-term freight task and that of POAL. The

necessary addition of berths and container facilities to the south and east would impact on

flight paths and the airport runway, bridge marina and highway would need to be relocated.

Marine and coastal engineers advise that tidal currents mean the increased shipping activity

would be challenging, with a risk of congestion affecting vessel operations and limiting port

capacity. Even if this long-term capacity can be realised, Tauranga would have few remaining

options, other than expanding to the west of Sulphur Point, into the public reserve and marina.

10. A shared increase in capacity at Northport and Port of Tauranga could accommodate the

freight task at 60 years, based on an assumed freight volume split, at which point these ports

would likely be at, or near, full capacity with little or no room to expand. There is significant risk

market forces would direct freight such that capacity at one or other port may be constrained

by the limits described above at an earlier date. There would have been considerable

investment into building a scaled-back container port at Northport that does not provide

sufficient additional long-term capacity, relative to POAL on the Waitematā Harbour, while

being further away.

11. The new port options, on the Firth of Thames or the Manukau Harbour, would have sufficient

capacity for the long term beyond 60-years and well beyond. Following modern planning

principles, the concept design is for a littoral island port (i.e. close to shore) that allows for

capacity to be built in stages, expanding as needed in response to freight growth. Obtaining

resource consents for these new ports, or indeed for any coastal change, will be challenging.

A cost benefit analysis to show the economic cost

12. The cost benefit analysis takes a long-term societal perspective for each option relative to the

base case in which the port activities are assumed remain in place. There are detailed costings

with respect to supply chain infrastructure (port, rail and road) and freight operations (freight

movement costs, associated congestion, emissions and safety impacts). The benefits are more

challenging to model and so are unavoidably imprecise, relating to the alternative uses of the

Auckland waterfront land (i.e. amenity values, welfare gains, agglomeration benefits).

13. The cost benefit analysis shows that all options for moving the freight operations from the

Waitematā Harbour are likely to involve a net economic cost. This result highlights how new

port capacity, and associated landside infrastructure, inevitably involves large costs. A new port

on the Manukau Harbour stands out as the highest-ranked option on the basis of being the

least costly over the long-term, accounting for upfront capital expenditure and ongoing supply

chain operating costs (-$1.982 billion, net present value basis). The proximity of Manukau

Harbour to the freight destinations in South Auckland is the major reason for this result, with

the relatively short distances being favourable for freight movement and, to some extent, the

landside infrastructure costs.

14. The Port of Tauranga option is ranked second in terms of net economic cost (-$3.703 billion,

net present value), followed by Northport (-$6.252 billion, net present value) and the option of

a shared increase at Northport and the Port of Tauranga (-$6.847 billion, net present value).

These options face higher freight movement costs with Northport, in particular, also requiring

some large investments in rail and road infrastructure.

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The other new port option, on the Firth of Thames, has a higher net economic cost (-$7.294

billion, net present value), than the Manukau Harbour option, due to the cost of constructing

road and rail links over a longer distance that involves some complex terrain, and the greater

distance from the freight destinations in South Auckland.

Results of the cost benefit analysis ($ million net present value)

Northport

expansion

Port of

Tauranga

expansion

Shared

increase at

Northport &

Tauranga

Firth of

Thames

(new port)

Manukau

Harbour

(new port)

Total benefits 957 957 957 1,009 1,579

Total costs 7,209 4,661 7,804 8,303 3,561

Net benefits -6,252 -3,703 -6,847 -7,294 -1,982

Benefit-cost ratio 0.133 0.205 0.123 0.121 0.443

Rank 3 2 4 5 1

Regional economic impact considerations

15. Assessment of regional economic development effects suggests that, on its own, a relocation of

port activity is unlikely to substantially alter regional economies. This is consistent with relevant

literature which shows that port investments have lower economic impacts relative to other

transport-related investments such as airport, road and rail infrastructure.

16. The economic stimulus in Northland, under the Northport option, would likely be larger than

that for the Bay of Plenty, under the Port of Tauranga option. This reflects the relative size of

their economies when faced with a similar impulse from a port relocation. However, most of the

gains would be felt in regions outside where the rise in activity takes place. Thus, an impulse felt

in Northland would likely result in greater impacts in Auckland. If the freight operations were

relocated to the Bay of Plenty, the impacts would be felt in Waikato and Auckland.

17. Ultimately, the potential for regional economic impacts is a subsidiary consideration, relative to

the gateway test of an option providing sufficient long-term capacity and the consideration of

the long-run economic cost implications from a national perspective.

Competition effect considerations

18. Competition effects are an important consideration. The three options involving existing ports

(i.e. relocation to Northport and/or the Port of Tauranga) reduce or eliminate port competition

unless there are changes in ownership. Increased port charges due to increased market power

might range between 6 to 32 per cent relative to current Ports of Auckland port charges and 5

to 24 per cent relative to current Port of Tauranga port charges. Our view is that exporters and

importers might face price increases at the higher end of the range.

19. A new port may increase or decrease competition, depending on ownership (e.g. independent

or merged with existing ports) and regulatory settings (e.g. forced de-merger).

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Supply chain participant perspectives

20. This study conducted targeted discussions with supply chain participants comprising shipping

lines, freight forwarding companies, and critical industry and freight owners. It is clear that

distance to market is critical to supply chain costs. These views necessarily reflect their own

business perspectives.

21. Among those spoken with, Northport is generally considered too far from main markets to

function as a primary import port, given the current predominance of industrial activities,

warehousing and distribution hubs in South Auckland, Waikato and the Bay of Plenty. This is

not a unanimous view, as some place less weight on additional costs with freight distance.

22. A clear message from participants who are importing or exporting break bulk or general cargo

(i.e. cargo that is not containerised) is that they rely on current port proximity. Break bulk

shipping comprises the importation or transhipment of cement, sand, grains and the export of

scrap metal. Break bulk tends to be low margin freight and, in the absence of a nearby port, the

additional landside transportation costs could make some of this trade prohibitive and would

disproportionately increase costs.

23. Manukau Harbour was cited by supply chain participants as being right beside the industrial

activities and the warehousing and distribution hubs of South Auckland, allowing for landside

transportation costs to be similar or lower than current arrangements.

24. There is a perception that conditions and the bar at the Manukau Harbour entrance could make

access uncertain. A port planner with extensive international experience has confirmed there is

no credible basis for this view. It is necessary to differentiate between the current entrance and

a future state with a dredged and maintained channel, which sediment flow modelling shows

would be achievable and stable. The indication from a marine insurance underwriter is that, in

this scenario, it is unlikely that insurance considerations would be a barrier for shipping access.

25. Shipping line representatives concluded that they would prefer a new port on the Firth of

Thames, however a container port on the Manukau Harbour could work well for shipping routes

from Australia and Asia. Ultimately, shipping lines will call where the main ports are located,

while preferring to take the lower cost option, where available.

Conclusions and possible next steps

26. On the basis of the gateway test of long-term capacity and a cost benefit analysis to determine

long-term economic cost, Manukau Harbour emerges as the option that can provide sufficient

long-term port capacity at least cost.

a) Manukau Harbour is one of only two options that meet the gateway test of ensuring

sufficient long-term capacity – the other being a new port on the Firth of Thames.

b) The cost benefit analysis shows that all options result in an economic cost, with Manukau

Harbour being the lowest cost option.

c) There is no sound basis for excluding Manukau Harbour as a viable option for a future

container port, either due to its entrance or its location on the west coast.

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27. Obtaining consents for any activity that involves coastal environments is highly challenging,

given regulatory frameworks and environmental protections. Obtaining consent for a new port

will be more challenging than for an existing port. Timeframes for the planning and consenting

processes are estimated at 5-7 years for an existing port and 7-10 years for a new port. There is

risk of consenting failure particularly for new ports but also for any coastal change.

28. With any decision taken, a detailed feasibility study will be needed to test and confirm a range

details relating to port design, commerical arrangements, coastal engineering, landside

infrastructure requirements, coastal planning and consenting details, as well as undertaking full

engagement with stakeholders.

29. The large scale investment and the consenting challenges mean that it may be tempting to stay

put on the Waitematā Harbour. This direction presents a risk of an economic bottleneck

emerging sooner than expected, and suboptimal responses to supply chain resilience. Certainty

is needed with respect to the long-term strategy for ensuring sufficient port capacity and

appropriate investment decisions. A delay in taking a decision will make an eventual shift more

difficult if existing options are diminished by other developments.The Auckland Council

perspective warrants close consideration, given its port ownership stake. On the one hand, it

could face the loss of the enterprise value of the freight operations and on the other hand, the

proceeds from a land transaction (e.g. long-term lease arrangements) are unlikely to fund much

more than a rectification of the land and establish infrastructure for a new waterfront precinct.

Value uplift, to a large extent, may be captured by land developers, who would bear the

construction and development risk.

Summary of iwi and Māori feedback

30. The key takeaways from iwi and Māori engagement were (Ministry of Transport, The Policy

Shop, 2020):

• There will be a negative reaction from iwi and Māori groups if the Government takes any

final decision on the relocation of Auckland’s port without undertaking what they consider

a process befitting the Treaty partnership – including the sharing of detailed information

and analysis, and resourcing to facilitate informed decision making.

• Iwi dynamics and competing iwi claims will have a significant impact on Government

decision-making on the future of POAL land.

• Port relocation is likely to increase the pressure for outstanding Treaty and Marine and

Coastal Area (Takutai Moana) Act (MACA) claims over Auckland Port/Waitematā Harbour

and whatever area is proposed for relocation.

• None of the options necessarily has a ‘fatal flaw’ from the perspective of Māori groups, and

some would welcome a port being relocated to their rohe; but they will look to secure

protection of customary interests, net environmental benefits and commercial investment

opportunities.

15

Comparison with Working Group findings

31. This study reaches a different conclusion from the Working Group report and the main reasons

for this difference are as follows.

a) This study takes a position that a longer timeframe for analysis is necessary, with 60 years

being the minimum, given the scale of investment and long-lived nature of port assets.

The Working Group report used a timeframe of 30 years.

b) This study has examined the new port options and concludes that there is no sound basis

for excluding Manukau Harbour as a viable option for a future container port, either due

to its entrance or its location on the west coast.

c) This study has benefited from a detailed look at the current capacity and expansion plans

of existing ports and at the long-term capacity requirements and associated costs for

each option. In this respect, this study has had the advantage of being able to build on

the work undertaken and commissioned by the Working Group.

d) This study takes a different view on the treatment of avoided road costs (benefits); and

treatment of financial streams from waterfront land differs; including amenity value;

Table 1 below provides further general comparison of the basis for the differences between the two

studies. Table 24 in section 8 provides a specific comparison of the differences in the economic

analysis of the Northport option (other options in Appendix A).

Table 1 Comparison with Working Group findings across five options in scope

Working Group findings Key findings of this study Basis for difference

Urgency is required, mainly due to

landside pressures.

Certainty rather than urgency is the

main issue. POAL has around 30

years before hitting capacity

constraints.

Discussion with POAL and analysis of

its port strategy by marine and

coastal engineers and a port planner.

Specialist traffic modelling used in

current analysis.

Road congestion is a driver.

Freight is a small part of the

congestion issue and alternative land

use will likely generate even more

traffic.

Specialist traffic modelling used in

current analysis; not available to WG.

Northport is the only scenario that

results in (significant) gains to

society.

All options moving freight from

Waitematā Harbour are a net

economic loss to the nation, when a

long-term societal perspective is

taken into account.

Interpretation of costs and benefits

relevant for economic CBA.

Auckland Council would benefit from

relocation due to rates and lease

income.

Auckland Council would deliver

services for rates and lease rates

cover council development costs, but

not much more. An operating port is

more valuable than a redeveloped

site to Auckland Council.

Discussion with Auckland Council.

Specialist valuation expertise used in

current study.

16

Working Group findings Key findings of this study Basis for difference

Northport has capacity to grow to

meet Auckland’s freight task.

Northport cannot provide sufficient

capacity to accommodate the long-

term, 60-year freight task.

Specialist advice from marine and

coastal engineers and a port planner,

more in-depth than views put

forward for WG.

A longer time horizon.

Northport would result in cost

savings to road users.

The Northport option results in

higher road user costs.

Re-modelled underlying parameters

around mode shares and trip

characteristics; robust correction of

Working Group data/assumptions.

Manukau did not warrant modelling

on the basis of perceived barriers

(e.g. risk and insurability).

Perceived barriers will not be

insurmountable Access to specialist advice.

17

Summary of findings with respect to policy objectives

The officials’ briefing to UNISCS Ministers outlined a number of policy objectives for consideration

to help guide decision making. The table below provides an overview of the research conducted in

this work that is relevant to these objectives.

Findings mapped against policy objectives

Policy objective Northport

expansion

Port of

Tauranga

expansion

A shared

increase at

Northport

& Tauranga

Firth of

Thames

(new port)

Manukau

Harbour

(new port)

Effect on supply chain

efficiency

(based on cost per TEU)

Materially

reduces

efficiency

Materially

reduces

efficiency

Materially

reduces

efficiency

Neutral or

minor

reduction

Neutral or

minor

increase


competition

(based on port

competition)

Materially

reduces

competition

Materially

reduces

competition

Materially

reduces

competition,

with current

ownership

May increase

competition,

or decrease

competition

if port

merger

May increase

competition,

or decrease

competition

if port

merger


resilience

(Port number and

capacity)

Reduces

number of

ports

Reduces

number of

ports

Reduces

number of

ports

Increases

capacity and

adaptability

Increases

capacity and

adaptability

Impact on Auckland

congestion

Increases congestion through alternative POAL land use

Regional and social

economic development

effects

High impact

in Northland,

with most

effect in

Auckland

High but

diffuse

benefit

captured in

Bay of Plenty

and Waikato

Dispersed

benefit in

Northland,

Waikato, Bay

of Plenty and

Auckland

A transfer

within

Auckland

A transfer

within

Auckland

Environmental effects –

(based on land transport

emissions)

Materially

increase

Materially

increase

Materially

increase

Minor

increase

Same or

possible

decrease

Recognising iwi interests

and supporting their

economic participation

Refer to Iwi engagement paper

Transport safety costs Materially

increase

Materially

increase

Materially

increase

Minor

increase

Same or

possible

decrease

Benefits to Auckland City

of alternative use of the

POAL land

Impact does not differ among the options

18

1. Introduction

This integrative report summarises the findings of a collective of consultants led by Sapere Research

Group (Sapere) containing eight workstreams (see Figure 1 below) in relation to the Upper North

Island Supply Chain (equivalently Upper North Island Ports). The programme of work was to consider,

from the specialist perspectives of each workstream, the options for movement of the Ports of

Auckland Limited (POAL)’s freight traffic including bulk cars and container freight to other specified

destinations in New Zealand.

The nature of the report is integrative, in that it combines insights from commissioned experts across

a range of specialist areas in fifteen detailed subsidiary reports. The intention is for all pertinent

knowledge to be contained in one place and that the material is:

• complete- includes as much data as is estimable

• transparent- outlines all assumptions, data sources and relationships

• accessible- easy to read and understand

• robust- defensible and able to withstand scrutiny

• relevant- of interest to decision-makers.

The main purpose of this report is to improve, rather than make perfect, the information base

available to decision-makers. While the analysis contained in this report is as comprehensive as

possible given the time and resources available, the report is a contribution to decision-making and

on its own, cannot be the final word.

This section provides an introduction to the objective, context and scope of this programme of work,

the project approach and the application of a standard cost-benefit analysis (problem definition and

policy objectives, option identification, quantification and assessment) to structure the evidence of the

workstream perspectives in the policy consideration in this integrated report. The intent is to develop

an integrated summary of these perspectives on the assessment of each option within a coherent

policy narrative, quantitatively assessed for each perspective where possible.

1.1 Ongoing consideration of North Island supply chain

Upper North Island Ports have been of interest to a range of parties for some time. One port company

Chief Executive reflected that to his knowledge, there had been 22 previous studies into Upper North

Island Ports within the last 15 years or so. He also observed that there been little action taken as a

result of the past studies.

This report responds to Cabinet’s request to officials to provide advice on Upper North Island Supply

Chain Strategy, following receipt of most recent study from the Independent Working Group report in

December 2019. Cabinet appointed the Independent Working Group in September 2018 to review the

Upper North Island freight and logistics sector and advise on a potential future location or locations

19

for Ports of Auckland, with serious consideration to be given to Northport.4 The Working Group review

would set out the Independent Working Group’s joint view of:

• Current and future drivers of freight and logistics demand, including the impact of

technological change.

• A potential future location or locations for Ports of Auckland, with serious consideration to

be given to Northport. As ports are long term assets, the work needs to take a view that is

30-50 years or longer.

• Supporting priorities for other transport infrastructure, across road, rail and other modes

and corridors such as coastal shipping.

• Potential priorities for transport-related infrastructure investment from a national

economic and regional development perspective.

• The optimal regulatory settings, and planning and investment frameworks across

government to give effect to the review findings.

• Future challenges on which government and industry would need to work together.

• Key actions to be taken over the next five years.

The Working Group considered a range of scenarios to determine the most efficient arrangement of

Upper North Island Ports.

The Working Group’s final report to Cabinet strongly concluded the “Ports of Auckland’s CBD freight

operation is no longer economically or environmentally viable” and Auckland’s freight operations

should be progressively closed with future freight shipping handled by the development of Northport

and the continuation of Tauranga’s existing expansion plans.5 The Working Group’s report was

supported by economic analysis over a 30-year timeframe of a range of scenarios that consider a

number of different infrastructure configurations including sole port, partial move and split port

options.

The Working Group’s preferred approach was to encourage commercial supply chain organisation,

including port landowners and operating companies, to make the investment required for the change.

Total change costs were estimated by the Working Group to be around $10 billion, with the Crown’s

investment estimated to be $3-$4 billion over the next 10-15 years for rail and road infrastructure.

Further robust analysis was sought by Cabinet

While noting the Ports of Auckland Waitematā Harbour berths are not viable as the Upper North

Island’s key import port in the long term, in December 2019 Cabinet sought further robust advice to

4 See https://www.transport.govt.nz/assets/Uploads/Our-Work/Documents/cc9d34704a/UNI-Cabinet-Paper-and-

Terms-of-Reference_no-redactions.pdf 5 See https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/1.-MOT10025-

UNISCS-Final-Report_final_8-11-19.pdf





20

inform future decisions on the Upper North Island Supply Chain Strategy, with Ministers of Finance,

Transport and Regional Economic Development reporting on a programme including:6

• logistics and supply chain analysis

• transport and environmental analysis

• land use planning and wider economic analysis

• legislative and regulatory considerations

• funding and financing

• governance and commercial considerations

• stakeholder engagement and communications.

1.2 This study was intended to be in partnership with

officials

There was a particularly high rate of engagement between Sapere and officials in this programme of

work, especially at the start, with the intent to develop the analysis in partnership with officials and

engaging with a broad range of stakeholders. This included:

1. The Ministry of Transport (MoT) who was the lead agency responsible for this programme of

work, and together with Treasury and the Provincial Development Unit (of the Ministry of

Business, Innovation and Employment) formed the Oversight Group to govern the project and

providing staff to co-lead the work-streams with consultants.

2. A collective of consultants led by Sapere providing expertise in:

• port and marine engineering from Advisian and port strategy/planning from Black Quay

• rail engineering from Rail Infrastructure Consultants NZ

• transport and supply chain expertise and transport modelling from Murray King & Francis

Small Consultancy Ltd and Richard Paling Consulting Ltd

• traffic modelling from Flow Transportation Specialists

• marine and coastal process modelling from eCoast

• resource planning from Mitchell Daysh

• business valuation from Sapere Valuation

• social impact from Tika Impact Ltd

3. The MoT led stakeholder engagement with “cornerstone partners” including Auckland

Council, Ports of Auckland, Bay of Plenty Regional Council, Port of Tauranga, Northland

Regional Council, Northport Limited and Marsden Maritime Holdings Limited. The MoT

together with iwi consultants from the Policy Shop engaged with iwi and Māori stakeholders.

4. Third party-related agencies including the Infrastructure Commission, Infrastructure Victoria,

NZTA, KiwiRail and Auckland Transport were also contacted.

6 See https://www.transport.govt.nz/assets/Import/Uploads/Research/Documents/Cabinet-Papers/CAB-19-MIN-

0647-Minute-002-MarkUp-30012020-Redacted.pdf



21

5. Sapere acknowledges the assistance of Ernst & Young with the economic analysis

underpinning the 2019 Working Group report, and the contributions of supply chain

stakeholders engaged to provide real world perspectives and insight into likely market

reactions from proposed relocation of POAL.

COVID disrupted plans

The intention for close working relationships in each workstream between government officials and

consultants was disrupted by the measures implemented for the control of the COVID pandemic.

Consequently, while government officials worked closely with the consultant team in the early phases

of the work, this engagement reduced from late March. Sapere led the team of consultants that

produced the work in the workstreams of Figure 1 that are integrated in this report.

This commissioned study is a significant component but not the totality of the government

programme led by the Ministry of Transport.

Figure 1 Project workstreams and specialist consultants

The instruction to us is that all freight is to be moved from POAL’s Waitematā Harbour berths and

only ferry traffic and cruise liner activity would remain. With this assumption we are to examine

• the drivers that influence when the port operations move and

• where they would be relocated.

22

Cabinet noted that the work programme would consider the Northport scenario and other scenarios

looked at by the Working Group. There are five options in scope based on the options considered by

the Working Group, all of which are covered to a similar degree in this report:




• a new port (greenfield site) on the Firth of Thames, and

• a new port (greenfield site) on the Manukau Harbour.

The scope excluded options for the partial move or split options (e.g. moving only cars from POAL)

and any options not considered by the Working Group. Manukau Harbour was taken off the table

early in the Working Group process and was not included in the Working Group's economic analysis.

The constrained project timeframe available meant that certain aspects were excluded, for example,

willingness-to-pay surveys to underpin the economic value of the ports’ social licence to operate,

which limits this part of the economic analysis. Some stakeholders questioned the utility of findings

within such a timeframe – however the breadth and depth of expertise participating in the

workstreams in Figure 1 is greater than that available to the Working Group, and the significant body

of work integrated in this report represents material progress understanding the specified options.

Progress was possible because the scope was designed to be as ‘additive’ as possible to existing

understanding to consider the five options in terms of their suitability to assume all the freight task

currently handled by POAL including containers, bulk and cars. That is we were informed by and built

upon while specifically avoiding replication of previous work. This inherently includes a critical

assessment of the economic analysis conducted for the Working Group to grasp where understanding

can be advanced by the specialist analyses.

A key advance on previous work has been taking a longer view – specifically analysing and modelling

key trends and economic value over a 60-year timeframe compared with 30-year timeframe in

previous studies, suitable for a mega-project scale, multi-generational investment.

The programme of work also includes some perspectives on how POAL operations can be relocated

including the potential next steps and factors influencing timing for decision making.

Our objective is a part but not whole of the government

work programme

As consultants, our objective is to provide expertise that advances the evidence base for decision

makers. This integrative report and the subsidiary reports are consultant branded reports that

represent the expertise and opinions of their authors. Our objective, as consultants to government, is

to apply our respective expertise to produce an evidence base that advances the understanding of

current and future challenges and supports informed decision making. Within the constraints of the

timetable and scope of work, we have made material progress was made on the issues particularly

with respect to traffic modelling, infrastructure options and economic analysis.

23

We have attempted in this integrated report to present the lessons from the various workstreams in a

way that supports the broader programme of work and the government task of developing policy, for

example, by following the general structure for developing policy business cases.

We have attempted to align our collective reports with the advice sought by Cabinet, explain how the

advanced knowledge developed can be employed in a decision process, and why that process leads

to different conclusions on the path forwards than the Working Group.

The objective of the team of consultants to advance understanding of the Ports problem inherently

involves a critique of the Working Group’s report as the setting off point for our investigations. This

critique is not the primary purpose of the body of work reported on here, however it is natural to

reflect on how the current analyses raise challenges to the construction of a business case and cost-

benefit analysis, from the definition of the problem, analytic methods and assumptions, and hence

outcomes that vary from those of the Working Group. These differences are reflected upon in this

report.

1.3 Structure of this report

The structure of this report includes:

• Section 2 describes our approach to combining the assembled expertise to support

decision making for a mega-project.

• Section 3 describes [the freight forecasts and shipping trends over 60 years that underpin

the expected effective capacity problem at POAL’s Waitematā Harbour berths and

establishes the gateway test for alternative options to future proof the Upper North

Island’s supply chain.

• Section 4 describes the implications of such forecasts if freight were to remain with POAL

(the base case).

• Section 5 provides an overview of the options including infrastructure requirements and

planning and construction lead times.

• Section 6 lays out the major analytical findings from the economic cost benefit analysis.

• Section 7 describes the impacts of alternative land use at POAL’s Waitematā Harbour

berths once the freight is removed.

• Section 8 provides an analysis of the differences in method and data that lead the current

economic analysis to differ from that of the Working Group.

• Section 9 provides an estimate of resulting trends in supply chain costs based on the

collated data.

• Section 10 describes the analysis of regional economic impacts conducted to complement

the cost benefit analysis and the analysis social effects.

• Section 11 provides our commercial analysis of POAL and the financial implications for port

owners.

• Section 12 describes the perspectives of supply-chain stakeholders that provided nuance

to our understanding when developing the economic analysis.

• Section 13 describes the resource consenting issues for each option.

24

2. Advancing decision making for a mega-

project

Our approach involves two complementary components: a quantitative component centred on a Cost

Benefit Analysis (CBA) (with accompanying inputs and parameters from the relevant workstreams) and

a qualitative component that establishes the fundamental narrative of the work.

The pivot for the CBA component is instructions provided by the (The Treasury, 2015). That guidance

was augmented by parameter values and instruction contained in relevant NZTA materials (i.e.

Economic Evaluation Manual, Benefits Framework and Transformative Transport Projects documents).

Thus, we favour an orthodox or ‘standard’ approach to Cost Benefit Analysis.

2.1 Reflecting a prospective New Zealand mega-project

Large infrastructure projects such as the development of ports with associated road, rail, energy and

water infrastructure have long been recognised as “mega-projects”, about which a large body of

management literature has emerged (Gellert, 2003). There is no single definition of megaproject in the

literature and criteria vary, but generally characterised by a) a large investment commitment, b) a high

level of innovation and complexity in the investment/construction phase, particularly organizational

complexity with a vast array of stakeholders, c) very long-term operations and d) far reaching effects

on their environment and society.

The broad approach intended to be taken in this work reflects the large and long-term public and

private investment, and complex relationships between government divisions, infrastructure owners,

operators and users, district and regional councils, iwi and Māori and general public stakeholders.7

For this work, that complexity includes the need for a deep understanding of the views of Treaty

Partners. The key takeaways from iwi and Māori stakeholder engagement by MoT for this project are

as follows (Ministry of Transport, The Policy Shop, 2020):

• There will be a negative reaction from iwi and Māori groups if the Government takes any

final decision on the relocation of Auckland’s port without undertaking what they consider

a process befitting the Treaty partnership – including the sharing of detailed information

and analysis, and resourcing to facilitate informed decision making.

• Iwi dynamics and competing iwi claims will have a significant impact on Government

decision-making on the future of POAL land.

• Port relocation is likely to increase the pressure for outstanding Treaty and Marine and

Coastal Area (Takutai Moana) Act (MACA) claims over Auckland Port/Waitematā Harbour

and whatever area is proposed for relocation.

7 For example, for the options apart from Tauranga there are outstanding Treaty claims over the relevant harbour

water body. The Tauranga harbour claim is largely negotiated and involved a form of co-governance between iwi

and councils. The prosecution and negotiation of these claims and associated settlements are likely to be a

significant factor in implementing any relocation.

25

None of the options necessarily poses a ‘fatal flaw’ from the perspective of Māori groups, and some

would welcome a port being relocated to their rohe; but they will look to secure protection of

customary interests, net environmental benefits and commercial investment opportunities

2.2 How the workstreams advance our knowledge

Figure 1 outlines the structure of the eight analytic workstreams that have been undertaken to

advance the evidence base that underpins understanding the challenges in the proposal to move the

Ports of Auckland.

The first workstream is modelling of the future freight shipments that are currently handled by POA.

These forecasts of freight volumes underpin understanding the freight handling capacity that both:

1. sets a future limit on the Ports of Auckland when current capacity for bulk, cars and/or

container freight becomes insufficient, and

2. sets the minimum capacity requirement of any investment to replace or supplement the Ports

of Auckland at (or before) that date, and well into the future to avoid further demand for further

mega-project investment to boost capacity. This condition is the first test of any option.

The freight forecasts are also one key input of the CBA to assess the comparative economic value of

the options (like any future forecast, freight projects are uncertain, and the range of forecasts

employed to understand this uncertainty is discussed further below in Section 3).

• Traffic Congestion analysis both contributes to understanding the limits of the Ports of

Auckland and the economic impact of options through the CBA (Flow Transportation

Specialised, April 2020).

• Infrastructure Analysis both informs understanding of the capabilities and constraints on

freight capacity at the sites in the options, and supplies inputs to the CBA (Sapere Research

Group, 2020c; Advisian, 2020; Black Quay Consulting, 2020; Black Quay Consulting, 2020;

Black Quay Consulting, 2020; Rail Infrastructure Consultants NZ, 2020; eCoast, 2020)

• Land Valuation supplies inputs to the CBA (Sapere Research Group, 2020d).

• Land Use provides perspectives on the alternative uses of land, consenting issues and

supplies inputs to the CBA (Mitchell Daysh, 2020)

• Stakeholder Incentives & Competition Implications investigates the commercial viability of

the options and the requirements for government funding, and supplies inputs to the CBA

(Sapere Research Group, 2020b; Sapere Research Group, 2020a; Sapere Valuation, 2020) .

• Regional Economic & Social Impact both provides some (constrained) view on regional

impacts as well as supplies inputs to the CBA (Sapere Research Group, 2020e; Tika Impact,

2020).

2.3 How would we consider decision making for a mega-

project?

The primary purpose of the other workstreams are to develop the evidential data that underpin the

CBA inputs. We reiterate the emphasis that the objective of economic Cost Benefit Analysis is to

26

attempt to evaluate societal values, quantified in dollar terms for clear numerical comparison. Where

understanding is not currently available to quantify the economic value of any societal benefit or cost,

the analysis should qualitatively explain how the valued benefit or cost would influence the quantified

outcome.

The capacity condition and the CBA results provide the primary selection criteria to assess whether the

options are even technically feasible and then preferable from a societal viewpoint, summarised in a

form like Table 2.

Table 2 Criteria for narrowing long list of options

Option A Option B Option C Option D Option E

Gateway test* Yes/No/Risk

Total benefits $m NPV

Total costs $m NPV

Net benefits $m NPV

Rank #

Benefit-cost ratio Benefit: Cost

* Note: Long term capacity refers to the range of dimension of effective capacity, including but not limited to berths, channel

depth and congestion, that limit the ability of an option to service freight demand beyond the modelling time horizon.

Cost Benefit Analysis is not perfect and such limitations may not adequately distinguish a single

preferred option. Some societal benefits/costs cannot be easily monetised and are not directly

included in the analysis. The economic analysis is then supported by a range of secondary analyses.

These identify risks, constraints and other likely modifications of the economic analysis.

A ‘standard’ business case/economic CBA approach is

uncontroversial and provides the basis for the analysis

The general structure of the ‘standard’ approach to CBA is shown in Figure 2. We worked

systematically through the various steps sequentially to better highlight the basis, linkages and scale

of effects being measured.

Figure 2 CBA structure

Source: Sapere

Traditionally, problems arise between steps two and three where the steps are often conflated,

resulting in lack of transparency and inability to validate findings. We chose to separate these steps to

aid understanding, remove ambiguity and highlight the thinking that underpins the various analytical

27

steps. This process is designed to allow easy reproduction and/or replication of results by other

parties, as required.

The use of discounted cashflow techniques for monetised costs and benefits within a general

modelling structure is also standard practice, resulting in common summary metrics (e.g. benefit-cost

ratio, net present value).

This report is focused on the CBA outcomes with key themes from the CBA approach, assumptions

and data. Detailed technical discussion on the CBA is included in (Sapere Research Group, 2020f)

Definition of the baseline and options

Economic Cost Benefit Analysis takes a ‘with or without’ measurement approach to policy proposals.

The objective is to assess the change in economic effects of the policy options proposed to deliver the

policy objectives by reference to what would have taken place in the absence of the proposal.

This ‘without’ element is the base case that is typically the “status quo” (i.e. “do nothing”) scenario or,

where doing nothing is unfeasible, the “do minimum” scenario. This comparison of the base case

against proposed alternative options allows decision-makers to see the incremental effects of the

policy options available.

In the base case, POAL is assumed to remain and expand on the Waitematā Harbour for 60 years for

the purpose of estimating a counterfactual infrastructure cost. In the real world, POAL may face

constraints on some aspects and not on others, and any scenario attempting to estimate such will be

contestable. The simple modelling choices are that all or none of the required consents are obtained.

Section 4 describes the reasons we have chosen an unconstrained base case, including consistency

with prior analysis.

Basic CBA attribution rules

The following set of basic rules for attributing impacts was utilised.

• Use marginal or incremental costs and benefits relative to the base case where available.

Only use average or other costs where no alternative is available.

• Use economic (resource) costs and benefits as much as possible. Financial costs and

benefits are distributional impacts that do not have an impact on overall net economic

impact and are hence excluded.

• The relevant span is national- displacement and offsetting effects are included as much as

possible.

• Only include those impacts (or a share of those impacts) that occur in the relevant time

period for analysis.

• Assign impacts to their appropriate place (i.e. disbenefits as costs and avoided costs as

benefits).

28

2.4 Important caveats

While the current work builds upon and extends understanding of the options to move freight from

POAL’s Waitematā Harbour berths, inevitably there have been constraints. The total project duration

has been rapid, and resources have been prioritised towards those areas and issues in which advances

were feasible in the available time. Hence, we stress that none of these caveats is sufficiently major to

render findings invalid, but rather we raise these limitations for context and transparency.

In particular, in extending the analysis and economic modelling horizon to 60-years, in many cases

existing data and/or forecasting tools do not look ahead for such a long period. In these cases, “work

arounds” were needed, or educated guesses drawing on the consortium team expertise were used.

Data issues arose in relation to:

• estimating the economic life of some assets

• determining costs for asset maintenance and whether given estimates included such costs

• port charges

• calculating infrastructure costs outside the scope of expertise or past the model time

period,

• detail on origins and destinations of freight in Auckland (and elsewhere).

We outline elements that are absent from, or remain unresolved in, our analysis. We also set out the

reason why and the implications of such absence or lack of finality for our reported results in Table 3.

Table 3 Outstanding data issues

Element Impact and reason Implication

Port charges Supply chain costs likely to be

underestimated, due to lack of data

Common across base case and options,

rankings unlikely to be affected

Rail safety externality

impacts

Rail freight movement safety costs

incomplete due to inability to isolate

freight component

Total impact likely to be minimal given

current very low level of e.g. national

deaths per rail km

Balancing container flow

impacts*

Unresolved due to lack of data Differential cost impacts of full versus

empty containers are coarsely estimated

Transhipment costs at

alternative ports*

Absent due to insufficient

understanding of incidence

Could underestimate costs of

alternative ports, particularly Manukau,

if transhipments significant

Ship size impacts Unresolved as available information

and understanding insufficient and

time/resource constraints

Potential inaccuracy in impact

estimates

Destination of freight in

Auckland

Estimated due to lack of precise data Aligned with Working Group

assumptions for comparability

Congestion costs other

than value of travel time

Traffic costs potentially understated

due to time/resource constraints

Underestimation consistent with EEM

standard practice

Impact on consumers Unresolved as extremely complex to

analyse

We don’t fully understand the full

implications on end user costs

* =further, more detailed work is recommended

29

3. Outlook for freight growth and vessel size

The outlook for the growth in freight volumes informs conclusions about the capacity of POAL and the

infrastructure capacity needed for other port options to accommodate the future freight task.

3.1 Forecasting growth in container freight

Forecasts for freight growth at POAL use the Ministry of Transport freight model, as updated for the

2019 National Freight Demand Study. The forecasts relate to the base case, in which POAL is assumed

to be able to expand on the Waitematā Harbour to handle growth for 60 years. Containerised freight,

comprising imports and exports, is of primary focus given volumes involved, the land area needed,

and the growth outlook. Three forecasts were prepared for the period to 2079, with 2018 as the base.

• Medium growth – a compounding annual rate of growth of 2.26 per cent. This is referred

to as the calibrated forecast.

• Higher growth – a compounding annual rate of growth of 2.51 per cent. This is referred to

as the calibrated (higher growth) forecast. It uses higher population and GDP growth rates.

• Low growth – a compounding annual rate of growth of 0.75 per cent. This is referred to as

the officials’ agreed forecast.

To put these rates in context, annual growth in container freight in the Upper North Island ports has

averaged over 4 per cent across 2012 to 2019. This study focuses on the calibrated forecast (medium

growth) as being the most plausible rate of growth for container volumes over the long-term. The

decision to focus on the calibrated forecast takes into account port planning assumptions used in

Australia and advice from a port planner with extensive international experience. Detailed analysis has

been included for the low growth forecast at the request of officials.

Summary of freight forecast differences

The low growth forecast is based on officials’ agreed assumptions for population and GDP

growth and supply and demand drivers within the model. This results in a forecast of freight

growth that is materially lower than in prior studies and lower than trend growth in the Upper

North Island. The lower growth rate arises because the model assumes that domestic supply of

goods grows in line with domestic demand and this results in low growth in import volumes.

The calibrated (medium growth) forecast adjusts the model’s demand and supply drivers to

better reflect trend import flows through the ports. The model treats the demand for, and

supply of, manufactured and retail goods as being dependent on a weighted relationship to

regional population and GDP growth. The adjustment is that the demand for manufactured

and retail goods continues to grow strongly as the economy develops but the capacity to

supply these goods domestically grows more modestly. The resulting imbalance is met by

imports, as has been the case in New Zealand for some time. This outcome is consistent with

the economy continuing to focus more on services with a reduced focus on manufacturing.

The high growth calibrated forecast is designed to test the impact of population and GDP

growth being higher than in the calibrated forecast. It uses slightly higher, but still plausible,

assumptions about long-run population and GDP growth.

30

Table 4 summarises the average annual growth rates of the forecasts over the 60-year timeframe. The

average annual growth rates over 30 years are also shown, to enable a comparison with figures used

in the 2019 consultants’ report commissioned by the Working Group, which used a 30-year timeframe.

This comparison shows that the calibrated forecast for this study has a similar annual rate of growth to

the lower figures used in the consultant report commissioned by the Working Group.

Table 4 Container freight forecast scenarios for Ports of Auckland – compounding annual growth rates

Scenario Over 30 years Over 60 years

Officials’ agreed forecast (low growth) 0.86% 0.75%

Calibrated forecast (medium growth) 2.18% 2.26%

Calibrated forecast (higher growth) 2.43% 2.51%

Working Group Consultants’ report (2019) – low 2.24% n/a

Working Group Consultants’ report (2019) – high 3.06% n/a

Sources: Freight modelling workstream outputs; EY (2019) consultants’ report to the UNISCS working group – rates derived

from the range of TEU volumes reported for 2018 and 2049.

Figure 3 compares the trend growth rate for each forecast, over 30 years, with a range derived from

the figures in the 2019 consultant’s report to the Working Group. Of note, the calibrated forecasts sit

either side of the lower end of the forecast range for container freight used in the 2019 report.

Figure 3 Container freight forecast scenarios for Ports of Auckland – comparison of trend growth

Sources: Freight modelling workstream; EY (2019) with additional analysis by Sapere

0

50

100

150

200

250

300

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Index, base = 100

Year

2019 forecast range Officials' agreed forecast Calibrated forecast Calibrated (higher) forecast

31

3.2 Sizing the future freight task

The future freight task represents the volume that would need to be accommodated over 60 years,

either at POAL or one of the port options. As well as the import and export of containers, the freight

task also comprises bulk freight (i.e. importation or transhipment of cement, sand, grains and the

export of scrap metal) and vehicle imports (all motorised vehicles). Results are shown for the medium

and officials’ agreed forecast and include transhipments.

Container freight is measured by twenty-foot equivalent units (TEU). Container freight grows to 3.84

million TEU in 2079 in the calibrated forecast, or 3.8 times the volume in 2020. Under the officials’

agreed forecast, container freight reaches 1.53 million TEU in 2079, or 1.6 times the volume in 2020.

Table 5 Container freight forecasts for Ports of Auckland – size of future freight task

Forecast 2020

million TEU

2079

million TEU

Ratio of 2020 to

2079

Calibrated 1.01 3.84 3.8 times

Officials’ agreed 0.99 1.53 1.5 times

Source: Sapere

Bulk freight, under the calibrated forecast, grows to 4.63 million tonnes in 2079, or 2.7 times the

volume in 2020. Under the officials’ agreed forecast, bulk freight reaches 2.67 million tonnes in 2079,

or 1.6 times the volume in 2020.

Table 6 Bulk freight forecasts for Ports of Auckland – size of future freight task

Forecast 2020

million tonnes

2079

million tonnes

Ratio of 2020 to

2079



Source: Sapere

Vehicle imports are assumed to grow at the rate used for container imports in each forecast. Under

the calibrated forecast, vehicle imports, reach 1.68 million in 2079, or 5.3 times that of 2020. Under the

officials’ agreed forecast, vehicle imports reach 0.48 million in 2079, or 1.6 times that of 2020.

Table 7 Vehicle import forecasts for Ports of Auckland – size of future freight task

Forecast 2020

million vehicles

2079

million vehicles

Ratio of 2020 to

2079



Source: Sapere

32

3.3 The container forecast is the most critical

Of these forecasts, the container forecast is the most critical, given POAL constraints and the outlook

for growth. The container trade also requires considerable investment in berthage, automation and

other infrastructure. In contrast, vehicles require a wharf to pull alongside, and yardage for temporary

parking, but can be driven off and out of the way, promptly. To this end, we sought an external expert

view on the long-term outlook for global and regional container trade. This view, in effect, points to

use of the calibrated forecast (medium growth) over the officials’ forecast (low growth) for this study.

Black Quay perspective on the outlook for container trade

Black Quay are specialist consultants, providing advanced port planning and specialist advisory

services to clients around the world. The company has presence in Australia, the United States and

the United Kingdom and planning studies delivered over the last five years include assignments in

Australia, North America and the Middle East.

Black Quay regularly prepares global and regional forecasts of container trade, based on research

into consumption, manufacturing and industrial trends. Outlooks for containerised trade for western

nations over the last five years have generally followed an annual average growth rate of between 2.6

per cent and 3.4 per cent. Black Quay has not prepared forecasts for this study but offers the following

high-level opinion.

Black Quay advises that global growth rates for container trade will likely reduce over time, as a result

of the container market maturing and less potential for further products to be containerised.

Balancing this, container consumption per capita in western countries is still growing and healthy

growth is expected in the medium term. There is no reason to expect that New Zealand would be

different.

Black Quay expects a generalised reduction for Australia from 2.6 per cent per year in the short to

medium term, to between 2.0 per cent and 2.26 per cent per year in the long term. This view factors

in near-term Covid19 impacts and reflects the growing reality of Australasia being connected to Asia

from an economic perspective. Black Quay’s view is that Asia will represent more than 90 per cent of

Australasian trade in the medium term.

Black Quay considers that an annual growth rate of 1 per cent or less into the long term would be

implausible and out of step with their port planning work elsewhere. In Black Quay’s view, basing a

regional port strategy for the long term on an annual container growth rate of 1 per cent or below

would be high risk and would not appear to fully consider long-term population trends, consumerism

trends, ageing and disruptive manufacturing techniques and the development of emerging industries.

Black Quay advises that it is important to identify the future freight volume at which a pre-determined

long-term relocation plan would be triggered. This volumetric trigger approach acknowledges the

uncertainty of long-run forecasts and allows for some flexibility to react to sustained upside or

downside surprises in trend growth of freight.

Source: Black Quay memo, May 2020.

33

3.4 Outlook for larger container vessels

Container vessels continue to grow in size, driven by economies of scale and competitive pressures.

Larger vessels mean larger loads, fewer visits and longer time to unload in port. The ability to

accommodate these larger vessels is one dimension of port capacity, with the implications being:

• entrance channels need sufficient width and depth to enable access

• more depth necessary at vessel berths and in turning bays

• longer vessel berths needed alongside the wharves.

Cascading effects across the global container vessel fleet are likely to increase the upper end of the

fleet visiting New Zealand, as well as the average vessel size. An outlook prepared by Black Quay

concludes that vessels of 7,500 to 8,000 TEU added on New Zealand routes (after 2019), will gradually

be replaced in the medium term (15-30 years) by vessels of 8,500 TEU and above, with a maximum

size of 11,000 TEU. Longer term (30-50 years), a small number of dimension-specific 13,000 to 14,000

TEU vessels will be operated on the primary Australasian services and would represent a significant

component of overall service capacity.

3.5 Important implications for POAL

POAL is, currently, constrained to vessels under 6,000 TEU and this has likely contributed to low

growth in container volumes and an increasing loss of market share to the Port of Tauranga, which

can accommodate these larger vessels. As examples, Maersk first sent a 9,500 TEU ship to Tauranga in

2016 and has been making regular calls since, with a successful trial of an 11,300 TEU ship in 2017.

Black Quay concludes that POAL is currently at a critical disadvantage, relative to the Port of Tauranga,

in accommodating larger container vessels. The POAL 30-year plan provides for the construction of a

third berth for container vessels and for the entrance channel to be dredged in two phases. Those

plans are contingent on obtaining resource consents. If both stages of POAL’s planned dredging are

consented, then visits of some 11,000 TEU vessels would become possible, however, it is Black Quay’s

view that access would be significantly limited in terms of specific vessel dimensions and operating

parameters (i.e. weight limits and a limited tidal window).

POAL would still be at a disadvantage relative to the Port of Tauranga in future, in terms of channel

depth. The extent of this disadvantage depends on the future size of vessels, but the disadvantage

could become more apparent in the short to medium term. Should container vessels increase to

13,000 to 14,000 TEU in size, and up to 380m long and a 15.5m draft, access to POAL would not be

possible without sizeable increases in channel depth and berth length beyond that allowed for in the

30-year plan and the current resource consent applications.

34

4. Ports of Auckland – the base case

This section considers the capacity of POAL to accommodate the long-term freight task. The purpose

is to assess when the freight operations of the port might need to move and determine a base case to

inform the cost benefit analysis of the port options.

4.1 Plans to address constraints and increase capacity

The freight forecasts assume that POAL can remain and expand on the Waitematā Harbour to

accommodate the increasing volume of freight over 60 years. However, the POAL freight operation is

currently constrained on several fronts, including container terminal capacity and the berths and

channel access to accommodate larger container vessels.

The POAL 30-year plan provides for an increase in capacity at the Fergusson Container Terminal. The

first stage involves constructing a third berth, automating the container yard and finishing some

reclamation. A second stage involves relocating the administration block to extend the reefer space,

constructing rail-mounted gantry and automating the rail yard. The 30-year plan also provides for the

Freyberg Wharf to be converted to container terminal operations and for the channel to be dredged

in two stages. Some of these steps require resource consents to be obtained (e.g. dredging work).

Figure 4 shows the planned expansion of container operations. Freyberg is the triangular wharf.

Figure 4 Ports of Auckland plan for expanded container terminal operations

Source: Advisian

35

4.2 Thirty years of port capacity plausibly remains

Two sets of port consultants, Advisian (marine and coastal engineers) and Black Quay (port planners),

were asked to independently assess the POAL 30-year plan and to offer a view on future capacity to

accommodate the container trade. The port consultants differentiate between peak capacity (i.e. the

maximum), at which a port can operate for short periods, and an effective or sustainable operating

capacity. The latter is the level at which a port can operate reliably and economically, beyond which

there are increasing risks from congestion for productivity, safety and profitability.

The port consultants recommend the concept of operating capacity be adopted for port planning

purposes. That is, it would be prudent to avoid using peak or best-case maximum capacities in

planning for the long term. The views offered by the port consultants suggest a planning assumption

of 2.04 to 2.24 million TEU per year for the future combined operating capacity of the Fergusson

Container Terminal and the Freyberg Wharf.

The estimates of annual operating capacity can be compared with the freight forecasts to determine

how long growth may be accommodated. Figure 5 plots the forecasts of TEU volumes per year against

the low and high estimates of future annual operating capacity.

Figure 5 Freight forecasts with estimates of Ports of Auckland operating capacity

Note: Operating capacity shown represents future capacity under current plans; capacity in 2020 is approximately 1m TEU

Sources: Sapere; Port consultant estimates

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2018

2020

2022

2024

2026

2028

2030

2032

2034

2036

2038

2040

2042

2044

2046

2048

2050

2052

2054

2056

2058

2060

2062

2064

2066

2068

2070

2072

2074

2076

2078

TEU million

operating capacity (low) operating capacity (high) Officials' agreed forecast

Calibrated forecast Calibrated (higher) forecast

36

The conclusion is that the POAL plan will enable sufficient operating capacity for approximately 30

years from 2020, with the range being 31 to 35 years of capacity, under the calibrated freight forecast

(medium growth), depending on the estimate of effective operating capacity. The range is 28 to 32

years of capacity under the higher growth calibrated forecast.

This conclusion assumes that constraints, such as channel dredging to enable larger vessels to access

the harbour entrance, will be addressed (i.e. that the necessary consents will be obtained). Under the

officials’ agreed forecast, using officials’ agreed assumptions, there is sufficient long-run capacity,

although, as noted above, this is less plausible.

4.3 The POAL base case as a baseline to test other options

At the heart of a robust cost benefit analysis is a base case against which to compare the proposed

alternative options. This base case is sometimes referred to as the “counterfactual”, “status quo”, or

“do minimum” scenario. The base case allows decision-makers to see the incremental effects of doing

something by accounting for the likely effects of not doing anything. As well as being essential for

estimating the incremental costs and benefits of a decision, the base case for this study gives useful

insights on the extent to which freight operations at the POAL site:

• contribute to traffic congestion in Auckland’s central city and elsewhere

• provide for efficient delivery of freight to final consumers

• maintain a competitive tension between the Upper North Island ports

• provide resilience to the supply chain in the Upper North Island.

Establishing the base case is not straightforward. The Treasury’s guidance on cost benefit analysis

notes that this is particularly difficult when the “do nothing” scenario is likely to evolve over the period

of analysis. This study considered two base cases: constrained and unconstrained.

A constrained base case would involve limiting expansion, possibly in line with the POAL 30-year plan.

The assumption would be that any necessary resource consents sought by POAL for major expansion

would not be granted, for example, due to environmental and/or societal considerations. In contrast,

an unconstrained base case assumes that POAL would receive necessary consents to expand as

needed over the long term.

In practical terms, having two base cases would be analytically unwieldy and create confusion rather

than clarity. In addition, the need for comparability with previous work, particularly the Working Group

study, suggests a single base case.

4.4 A simplifying assumption of further port expansion to

meet 60-year needs

This study uses an unconstrained base case, where POAL is assumed to be able to remain and expand

on the Waitematā Harbour for the 60-year period of analysis. In effect, the constraints that have been

previously identified around the ability of POAL to accommodate the future freight task have been put

to one side, to assess the incremental impacts of the relocation of freight operations.

37

Accommodating the growth in container volumes out to 2079, as determined in the calibrated

forecast, would require an expansion to the port precinct, beyond that envisaged for in the POAL 30-

year masterplan. Marine and coastal engineers Advisian have concluded that this would involve

substantial reclamation into the Waitematā Harbour.

This future reclamation may not necessarily extend beyond the north face of the Fergusson Wharf.

Such an expansion could, potentially, involve extending the container terminal an estimated 800

metres east of the existing Fergusson North Wharf with an associated 24 hectares of reclamation to

obtain enough berth capacity to service vessels until 2079. In effect, this would see the Fergusson

Container Terminal approximately doubling in size. Figure 6 shows what this scale of expansion could

look like, for illustrative purposes. This does not represent a concept plan or a worked up plan or a

proposal from POAL but, rather, highlights the extent of development that might be needed.

Reclamation is a controversial issue. This level of reclamation may prove very difficult to consent,

particularly as expansion eastward will have coastal impacts on the sediment flow through the

Waitematā Harbour, potentially causing siltation to occur around Mechanics Bay and Judges Bay. Such

an expansion of the port precinct would also likely require the relocation of existing facilities at

Mechanics Bay and Judges Bay.

38

Figure 6 POAL – A concept for required container terminal area, assuming unconstrained expansion to 2079

Source: Advisian Note: This is not a plan or proposal from POAL

39

5. Overview of options and infrastructure

This section provides an overview of the specified relocation options, including the infrastructure

needed to accommodate the future freight task and the timeframes involved.

5.1 Option set

This study has been directed to consider five options for the relocation of the POAL freight task:




• a new port on the Firth of Thames, and

• a new port on the Manukau Harbour.

Each option involves a managed closure of the POAL freight operations. Port capacity is constructed,

either at existing ports or at a new port to handle the future freight task. Alongside this, the necessary

landside infrastructure, in the form of road and rail capacity to accommodate the future freight task

would also be constructed.

The timeframe assumption used across these options, for simplicity, is that construction would

commence in 2030 with the additional capacity, either at an existing port or a new port, being in use

from 2035. The timeframe assumption allows time for a planning and consenting phase. This is based

on the results of a planning evaluation, which concluded that obtaining the necessary consents would

be challenging. Allowing for a design phase, technical reports, and the consenting process, the

conclusion is the timeframe would be 5-7 years at an existing port and 7-10 years for a new port.

These five options are compared against the base case, where POAL remains in place and expands on

the Waitematā Harbour and the Upper North Island continues to be serviced by the Port of Tauranga

and Northport in their current roles.

Under the assumption of a relocation to an existing or new port from 2035 onwards, the estimates of

infrastructure costs that would otherwise be incurred in retaining and expanding POAL on the

Waitematā Harbour after that point, are treated as being avoided costs.

5.2 Port capacity assessments

A port capacity assessment was prepared for each option, with regard to the future freight task of

approximately 3.8 million TEU in 2079. The estimates of capacity, concept layouts and costings were

prepared by port consultants, taking into account existing infrastructure, scope for expansion, and

potential environmental constraints. The cost estimates were subsequently scaled to reflect the

relatively lower freight growth path under the officials’ agreed forecast.

40

Northport expansion

Northport is located at Marsden Point, on the southern side of the entrance to Whāngārei Harbour.

While Northport has some room to expand in a physical sense, identified environmental constraints to

both the west and the east mean that the scope to expand the port is limited.

Northport could provide sufficient berth capacity until around 2060, under the calibrated freight

forecast, which is not materially longer than the estimated 30-year capacity remaining at POAL.

Northport could comfortably accommodate container trade of 2.6 million TEU per year, if required to

handle the POAL future freight task, whereas that task would reach 3.8 million TEU in 2079.

To accommodate the future freight task, marine and coastal engineers conclude that Northport would

need a 2km long quay, involving dredging and reclamation that expands beyond identified

constraints. To the west, those constraints include residential areas and wetlands associated with an

estuary. To the east, expansion would need to be into the area occupied by Refining NZ’s liquids

berths and well beyond, with significant impacts on coastal processes that would affect the

surrounding coastline and entrance channel. Figure 7 shows what that scale of expansion would entail.

The landside infrastructure requirements include a four-lane road, including sections from Warkworth

to Te Hana and a western bypass of the Brynderwyn Hills. These projects are likely to happen in the

medium-to-long term and so are treated as being brought forward by port expansion. As most freight

is destined for industry and distribution centres in South Auckland, the conclusion from transport

planners and consultants is that a freight-focused rail route through Auckland would be required to

separate freight from the metro passenger service. This would comprise an additional track on the line

from Swanson to Avondale with a new line deviating from Avondale to Southdown. A freight hub in

north west Auckland would not be a substitute for this, as freight from Northport arriving by rail

would be transferred by road to South Auckland, increasing handling costs and adding to congestion.

41

Figure 7 Northport expansion – concept layout for forecast freight task, 2079

Source: Advisian

42

Port of Tauranga expansion

The Port of Tauranga is located on the south east side of Tauranga Harbour. The port has the largest

container terminal operation at Sulphur Point, on the eastern side of the channel, with bulk freight,

such as log exports, on the eastern Mount Maunganui side of the channel.

The Port of Tauranga is able to accommodate its own long-term freight task, with capacity of up to

approximately 5.0 million TEU. This would involve expansion within the existing port precinct, with the

identified areas, beyond current expansion plans, being a northern berth on Sulphur Point and

between the liquids berth and Mount Maunganui Wharves with associated terminal backing. It also

assumes conversion to automated stacking cranes.

To accommodate the freight task for the minimum test of 60 years, an additional 3.8 million TEU on

top of its own long-term freight task, the Port of Tauranga would need significant expansion, into

industrial areas on each side of the estuary channel. The necessary addition of berths and container

facilities to the south and east of the port precinct would likely impact on flight paths from the nearby

airport. The implication of this expansion is that the airport runway, bridge marina and highway would

need to be relocated to accommodate the growth, triggering further infrastructure costs.

Marine and coastal engineers advise that the associated increase in shipping activity would be

challenging, given tidal currents, with a risk of congestion affecting vessel operations and limiting port

capacity. Even if this long-term capacity can be realised, Tauranga would have few remaining options,

other than expanding to the west of Sulphur Point, into the reserve and marina.

The landside infrastructure requirements include improvement works on SH1/ SH29 from south of

Cambridge to Tauriko. These works may occur in the medium-to-long term without the additional

expansion of the Port of Tauranga and so are treated as needing to be brought forward, rather than

wholly new costs. Additional works at the SH2/Dive Crescent interchange, adjacent to the Port

operations at Sulphur Point, would also be needed. Identified improvements to rail infrastructure

include capacity additions (passing loops) on the East Coast Main Trunk and the North Island Main

Trunk (Whangamarino), as well as the construction of a fourth main line from Westfield to Pukekohe.

The additional passing loops mean that the Kamai Tunnel would not be a constraint to increased

freight traffic.

43

Figure 8 Port of Tauranga expansion – concept layout for forecast freight task, 2079

Source: Advisian

44

An increase in capacity at Northport and Port of Tauranga

This option involves the POAL future freight task being split between Northport and the Port of

Tauranga, with expansion occurring at both ports. It builds on the work undertaken for the options

where either Northport or the Port of Tauranga accommodate that future freight task. The split is

based on the principle of Northport being developed to have some critical mass across freight types.

The container freight was split according to the estimate of operational capacity at Northport. The

geometry of Marsden Point and the risk of impacting on coastal processes mean that Northport has

limited growth opportunity to the east. For this reason, the future berth capacity is capped at

approximately 3.5 million TEU, which is larger than under the Northport option, due to half of the

POAL bulk freight and vehicle trade tasks being assumed to be handled at the Port of Tauranga. The

remainder of the container trade task is allocated to the Port of Tauranga.

It is possible that a different split may be more practical, or commercially viable, given the relative

proximity of existing industry and distribution centres to the two ports.

At the Port of Tauranga, the addition of part of the POAL future freight task, the long-term container

throughput increases beyond the approximate capacity of 5 million TEU per year. Further growth

would necessitate the addition of berths and container facilities to the south and east of the port

precinct, as outlined above, and this would likely impact on flight paths from the nearby airport.

Under this shared increase in capacity, Northport and Port of Tauranga could accommodate the

freight task at 60 years, at which point these ports would likely be at, or near, full capacity with little or

no room to expand. It is possible that fewer containers could be handled at Northport, thereby

creating some room for growth, but those containers would instead need to be handled at the Port of

Tauranga, which would also be approaching its practical limit.

Marine and coastal engineers also advise that the relocation of part of the POAL future freight task to

Northport and the Port of Tauranga will mean substantial shipping activity, which would be

challenging given the tidal currents. Both Northport and the Port of Tauranga are estuary ports with

natural navigation channels subject to strong currents. Such conditions make vessel navigation and

turning difficult and can impact port capacity due to limitations on vessel sailing times. The risk of port

capacity limitations due to navigation issues could be reduced through the use of larger tugs and

possible channel modifications, although this would be subject to navigation and coastal process

studies.

45

Figure 9 Northport expansion under split option – concept layout for forecast freight task, 2079

Source: Advisian

46

Figure 10 Port of Tauranga expansion under split option – concept layout for forecast freight task, 2079

Source: Advisian

47

A new port on the Firth of Thames

This option involves building a new port on the Firth of Thames to accommodate the POAL future

freight task. The location is based on the 2016 Port Future Study, which identified sites with potential

for an offshore island port connected by a short marine bridge, as Figure 11 shows. The focus here is

on Kawakawa Bay, as being representative of the costs involved. The other sites are not ruled out.

A new port on the Firth of Thames has some perceived advantages in that its east coast location

would be close to current shipping routes and close to landside supply chains around South Auckland

and the Bay of Plenty. There is sufficient natural depth and although the route has complexities,

navigating large vessels into the Firth of Thames is likely to be straightforward. The port’s C-shape

design and breakwaters would provide protection from waves in a relatively unprotected environment.

While this raises the construction cost, this is balanced by the lack of need for dredging.

Port planners Black Quay reviewed their basic theoretical footprint and construction rationale for this

option, as prepared for the 2016 Port Future Study to capture the main cost implications. The concept

is for an offshore island port that can be expanded over time to 10 million TEU per year, if required.

Capacity and costs have been scaled back to 5 million TEU, more than needed for the forecast freight

task of 3.8 million TEU in 2079. The theoretical footprint is based on productivity assumptions at the

berth and the yard, aligning with the high productivity of modern container terminals.

A new road connection would be needed, likely a four-lane road from the Mill Road area with a

bypass of Clevedon, with an improved connection from Mill Road to the Southern Motorway. A new

rail line, connecting from the North Island Main Trunk, would traverse some complex topography near

Kawakawa Bay that would require some high-cost tunnelling.

Figure 11 A new port on the Firth of Thames – potential sites (concept only)

Source: Black Quay

48

A new port on the Manukau Harbour

This option involves building a new port on the Manukau Harbour to accommodate the POAL future

freight task. The location is based on the 2016 Port Future Study, which identified three sites with

potential for an offshore island port connected by a marine bridge, as

Figure 12 shows. The focus here is on the Puhinui site, as being reasonably representative of the costs

involved. It is likely that the sites located further offshore would incur a higher construction cost, for

example, for longer marine bridges. However this would be offset by being closer to the natural

channel inside the harbour, compared with Puhinui, which is closer to the east shore, and so requiring

a large amount of upfront dredging in the inner harbour. Dredging channel through the entrance bar

would be necessary.

Port planners Black Quay revisited the Manukau Harbour concept, as prepared for the 2016 Port

Future Study, and reconfirmed that, in their view, it is feasible in principle as a new port, and

potentially offers the best location. The close proximity of Manukau Harbour to the existing industrial

area and distribution centres of South Auckland and to road and rail networks means that freight

costs would likely be lower than other options. The expansion potential and ability to phase

development would secure future port capacity needs for the Upper North Island. The concept is for

an offshore island port that can be expanded over time to 10 million TEU per year, if required.

Capacity and costs have been scaled to 5 million TEU, more than needed for the future freight task.

There is a perception that weather events and the bar at the Manukau Harbour entrance could make

access uncertain. In Black Quay’s view, shipping access to the harbour is a sound concept, taking into

account that modern vessels likely to use a new port in the Manukau Harbour are significantly more

advanced and manoeuvrable than those in the past. Tugboats could be stationed to escort ships

through the entrance as a safety measure, if needed, and this is not uncommon at ports worldwide.

Figure 12 A new port on Manukau Harbour – potential sites (concept only)

49

Source: Black Quay

A further factor that has been raised is the sedimentation of the dredged channel. While maintenance

dredging would be required, sediment flow modelling prepared for this study suggests that a dredged

entrance channel would be achievable and stable, with annual dredge volumes being comparable with

other ports around New Zealand. With respect to this future state, an indication from a marine

insurance underwriter is that, in this future scenario, it is unlikely that insurance considerations would

be a barrier for shipping access.

Shipping line representatives concluded that they would prefer a new port on the Firth of Thames,

however a container port on the Manukau Harbour could work well for shipping routes from Australia

and Asia. Ultimately, shipping lines will call where the main ports are located, while preferring to take

the lower cost option, where available.

Conclusions about port capacity

Whether an option can future proof the Upper North Island supply chain, by providing long-term

capacity to accommodate the future freight task, can be seen as a gateway test. Given the scale of

investment and the long-lived nature of port assets, the test used here is a minimum of 60 years of

capacity to handle the current and forecast POAL container freight volumes. Ideally, a port option

would still have clear capacity to expand thereafter. To put this timeframe in perspective, the Ports of

Auckland has been in its present location for approximately 180 years.

The primary benchmark used here is the capacity to accommodate approximately 3.8 million TEU per

year in 2079, based on the medium growth freight forecast, referred to as the calibrated forecast.

Neither Northport nor the Port of Tauranga, on their own, can provide sufficient capacity to

accommodate the long-term, 60-year freight task. A shared increase in capacity at Northport and Port

of Tauranga could accommodate the freight task at 60 years, at which point these ports would likely

be at, or near, full capacity with little or no room to expand. There would have been considerable

investment into building a scaled-back container port at Northport that does not provide sufficient

additional long-term capacity, relative to POAL on the Waitematā Harbour, while being further away

The new port options, on the Firth of Thames or the Manukau Harbour, would have sufficient capacity

for the long term. Following modern planning principles, the design would be a littoral island port (i.e.

close to shore) that allows capacity to be built in stages, expanding as needed.

There will always be some uncertainty with forecasts of freight volumes into the long term. The

conclusions here attempt to balance evidence of capacity with risk, with the focus on avoiding being

caught out with insufficient port capacity after making a decision that involves considerable long-term

investment and is likely to be irreversible in nature.

50

5.3 Schedule of landside infrastructure

The road infrastructure requirements were identified by using regional traffic models to determine the

impacts of the port-related traffic on the road network. Each port option is assumed to require a four-

lane road (two lanes each way) to separate truck traffic and other vehicles. Road projects for existing

ports are treated as being brought forward, rather than wholly new costs, with the estimates derived

from business cases. Road connections for the new ports are treated as new costs that would not

otherwise occur and were estimated by benchmarking against comparable projects elsewhere.

The rail infrastructure requirements for the existing port options were based on rail capacity model,

with high-level cost estimates being prepared with specialist input. The rail alignments and network

connections needed for the new port options were developed and costed by rail engineers.

Table 8 Summary of landside infrastructure projects

Option Road infrastructure Rail infrastructure

Northport • Additional works along SH1 between

SH15 and Te Hana are likely to be

required, with safety improvements.

• Corridor widening and rerouting at the

Brynderwyn Hills would be needed and

is treated as being brought forward.

• SH1 Warkworth to Wellsford project is

assumed to be brought forward.

• Capacity additions on the North

Auckland Line (rail loops).

• Construction of:

the Marsden Point spur

a third main line from Swanson to

Avondale,

a new line from Avondale to

Southdown.

Port of Tauranga • Additional works on SH1/ SH29 from

south of Cambridge to Tauriko are

likely to be necessary and are treated

as being brought forward.

• Additional works at the SH2/Dive

Crescent interchange, adjacent to the

Port operations at Sulphur Point.

• Capacity additions (rail loops) on:

the East Coast Main Trunk

the North Island Main Trunk

(Whangamarino).

• Construction of a fourth main line from

Westfield to Pukekohe.

Northport and

Port of Tauranga

• Additional works assumed to still be

brought forward for traffic increases.

• Capacity additions scaled back to

match each port’s share of freight task.

Firth of Thames • A new roading link from Mill Road to

the Firth of Thames site will be

required, with a bypass of Clevedon.

• An improved connection from Mill

Road to the Southern Motorway is also

likely to be necessary.

• Construction of a new line to a new

port on the Firth of Thames,

connecting from the North Island Main

Trunk.

Manukau Harbour • A new arterial standard roading link

from Roscommon Road/Wiri Station

Road is assumed to be required.

• An improved connection to SH20, in

the form of an upgraded interchange

at Lambie Drive.

• Construction of a new line to a new

port on the Manukau Harbour,

connecting from the North Island Main

Trunk.

51

5.4 Summary of infrastructure costs

Cost schedules for port, rail and road infrastructure for each option were prepared as an input into the

cost benefit analysis. Figure 13 and Table 9 summarise the estimate of infrastructure costs (in real

terms) for each option, split out by port, rail and road infrastructure. The road costs for existing ports

are treated as being brought forward, under the assumption they would otherwise occur later. The

figures on the left are for the calibrated freight forecast and those on the right are for the officials’

agreed forecast.

Figure 13 Summary of infrastructure costs by option

Table 9 Summary of infrastructure costs by option (real, 2019, $b)

Option Calibrated freight forecast Officials’ agreed forecast

Port Rail Road Total Port Rail Road Total

Port of Tauranga 2.6 2.0 1.5 6.2 1.3 0.5 1.5 3.3

Manukau Harbour 6.5 2.0 2.8 11.3 5.1 2.0 2.8 9.8

Northport and Tauranga 2.6 5.5 4.6 12.8 1.8 5.2 4.6 11.6

Northport 2.5 7.5 3.1 13.1 1.6 4.9 3.1 9.6

Firth of Thames 6.0 8.7 2.7 17.4 4.1 8.7 2.7 15.5

Source: Sapere

0

2

4

6

8

10

12

14

16

18

20

$ billion (real)

port rail road

Calibrated freight forecast Officials’ agreed forecast

52

5.5 Implications for phasing of costs

The following considerations have been used to inform the phasing of costs over time for the

schedules of infrastructure costs. This approach has also informed the cost benefit analysis.

• It appears that the earliest that major new port capacity could be planned and built would

be over a 10-year period from 2020. The assumption would be that a decision about the

location of future port capacity is made immediately, with the time taken for the approvals

process being 5 years (i.e. the lower end of the estimated range), and construction costs

being incurred over the next 5 years.

• The latest that a decision could be taken about major new port capacity would be 15 years

from when POAL operating capacity is reached. The above analysis suggests that this

decision could be taken as late as 2033 or 2040, with the assumptions being that planning

costs would be incurred over 10 years, followed by construction costs over the next 5

years. A delayed decision is not without risks, for example, in that the trigger point may not

be obvious at the time, or that the timeframes for the approvals process and construction

phase turn out to be materially longer than expected.

The following timeframes have been used for the phasing of costs in the infrastructure schedules,

following the principle of avoiding using best-case assumptions when planning for the long term.

• Upfront costs for planning and approvals allocated to the 2020s. These are spread evenly

over the decade.

• Construction costs allocated to the 2030s, spread evenly over the decade, with the

assumption being that new port capacity (or a new port) would be ready to be

commissioned by 2040.

• Given the above timings, the avoided base case costs (i.e. in the counterfactual) are those

that are scheduled to occur after the 2030s.

These assumptions are be applied to all options, for modelling simplicity and to enable comparability.

There may be a case for assuming that existing ports could happen slightly earlier, given the

estimation of a shorter timeframe for the approvals process, and this is explored as a sensitivity test in

the cost benefit analysis.

53

6. Major analytical findings from the cost

benefit analysis

This chapter summarises the key results of our analysis, which is designed to build upon previous

analysis undertaken for the Working Group by EY in 2019. The focus of the chapter is the CBA

findings, which we cast here in summary form.8 Before outlining results, we briefly describe the

relevant costs and benefits contained in the analysis. Results are structured as follows:

• top level or global findings (i.e. comparison across all options)

• sensitivity and scenario testing at global level

• comparison with Working Group results

• discussion on what results mean.

6.1 Taxonomy of costs and benefits aligns with previous

work

The underlying model used to perform the economic analysis for the Working Group was made

available to us. The model provided a high-level taxonomy of costs and benefits which we considered

met the needs for this work. Given this, and the desire to compare results of this analysis with the

Working Group’s findings, we chose to use the same base cost and benefit categories.

Table 10 outlines the cost and benefit categories used. We reiterate that costs and benefits are

economic in nature. That is, they reflect (as much as is possible) the monetary value of resources used

in the respective activities, and include costs and benefits incurred/received by parties outside of

those directly involved in activities. In other words, externalities are included in the analysis. In

addition, we are interested in the incremental costs and benefits only (i.e. those costs and benefits that

would not otherwise have occurred in the base case or status quo).

Further detail on the content components is provided in supporting papers including technical notes

on the cost benefit analysis (Sapere Research Group, 2020f) and the reports of the seven analytic

workstreams that support the economic analysis (see Figure 1 and references). While the ultimate

responsibility for the analysis results rests with us, the reliance on expert input and collaborative

nature of the data-gathering process is highlighted by the list of sources and contributors shown in

the table.

8 A supplementary technical paper (Sapere Research Group, 2020f)is provided outlining in more detail the

approach, inputs, process and assumptions underpinning the summary results.

54

Table 10 Cost and benefit categories

Category Impact Content Sources/contributors

Freight operations

(Opex)

Road use, direct Freight moving cost Richard Paling Consulting

Rail use, direct Freight moving cost Murray King & Francis Small Consultancy, KiwiRail

Road use, indirect Congestion, emissions, safety Flow Consultants, Richard Paling Consulting

Rail use, indirect Emissions Murray King & Francis Small Consultancy Ltd

Supply chain

investment

(Capex)

Port development Planning, capital works and equipment costs Advisian, Black Quay, Mitchell Daysh, ECoast

Road investment Planning, construction costs, distortionary costs to

the economy from using the tax system to fund

investments

NZTA, AT, AC

Rail investment Planning, construction costs, distortionary costs to

the economy from using the tax system to fund

investments

Rail Infrastructure Consultants, NAL business case, Kiwirail, Murray

King & Francis Small Consultancy Ltd, AC

Land

redevelopment

Net economic value of

alternative use of Auckland site

Value from improved visual amenity and

environmental protection (including the harbour)

to ratepayers, non-market gains to consumers and

producers of buildings on site, agglomeration

benefits to businesses, improved recreational

experience for users of park

AC, Panuku

55

6.2 All options result in net costs to society relative to the

status quo; Manukau favoured

Table 11 shows that all the options to relocate freight operations from Auckland result in net costs to

society. The Manukau (Puhinui) option results in the least cost to society: a net cost of around $2

billion in present value terms, while the Firth of Thames option would result in the greatest cost to

society, of just over $7 billion.

The highest benefit-cost ratio (BCR) for the Manukau (Puhinui) option is 0.443, which means that the

costs are roughly two and a quarter times the benefits. The worst performing option (Firth of Thames)

has costs that are just over eight times greater than the benefits.

6.3 Low operating costs main reason why Manukau stands

out

Clearly, there is more of a story to tell around the apparent lack of benefits or the preponderance of

costs. Table 12 breaks down the costs and benefits across all options for the calibrated projection (i.e.

the projection that results in the highest BCR).

The table shows that a major reason that Manukau stands out is the relatively low operating costs of

that option. Due to its proximity to the current site for freight operations in Auckland, we observe that

all relevant operating costs are lower than the status quo.

We also see that freight movement costs are highest for the Tauranga option, which is marginally

above that for the split Tauranga/Northport option.

Predictably, the difference in port development costs between the ‘new’ port options and those for

existing ports is very clear. Similarly, there is a noticeable difference in costs for options with existing

rail accessibility (i.e. Tauranga has existing rail access and Manukau is close to rail services) and the

other options where either new investment or upgrades to existing infrastructure, or both, is required.

Overall, the Tauranga option has the lowest capital costs due to the positive state of the existing port

and rail facilities. We note however, that some of the additional costs for capital works relating to the

airfield, marina and highway around the current Tauranga site were not subjected to as rigorous an

estimation process as the other capital costs.

6.4 Land redevelopment benefits uniform across options;

Manukau and Firth of Thames have additional benefits

There is uniformity of land redevelopment benefits across all the options. The same assumptions

around the economic value of alternative land use apply to all options (e.g. direct use benefits from

parkland, non-market gains to consumers and producers of the apartment and business buildings,

wider amenity gains from visual improvements and resource protection and agglomeration effects of

better effective density due to the CBD location). While the absolute value of the land redevelopment

benefits is equal across options, the impact on the BCRs differs due to the divergence in costs for each

56

option. Further detail on the composition of land redevelopment benefits is contained in section 7

below and a supporting paper on alternative land use.

In addition, the aforementioned beneficial impacts on road and rail use, transport safety, emissions

and traffic congestion for Manukau and the benefits associated with reduced traffic congestion for the

Firth of Thames option means these two options have greater total benefits than the other options.

57

Table 11 CBA results (PV, $m)

Northport Tauranga Firth of Thames Northport and Tauranga Manukau

Officials Calibrated Officials Calibrated Officials Calibrated Officials Calibrated Officials Calibrated

Total benefits $957 $957 $957 $957 $1,009 $1,009 $957 $957 $1,384 $1,579

Total costs $5,878 $7,209 $3,168 $4,661 $7,930 $8,303 $6,645 $7,804 $3,581 $3,561

Net benefits -$4,921 -$6,252 -$2,210 -$3,703 -$6,921 -$7,294 -$5,688 -$6,847 -$2,197 -$1,982

Rank 3 2 5 4 1

BCR 0.163 0.133 0.302 0.205 0.127 0.121 0.144 0.123 0.386 0.443

Table 12 CBA components, calibrated projection (PV, $m)


User costs: Rail $881 $1,285 $459 $1,123 -$159

User costs: Road $2,023 $2,010 $77 $2,124 -$314

Congestion costs $104 $16 -$51 $60 -$127

Emissions costs $188 $198 $31 $202 -$16

Safety costs $105 $109 $16 $113 -$5

Deadweight costs $565 $105 $941 $607 $802

Total operating costs $3,866 $3,723 $1,525 $4,229 $178

Port Capacity Investment $619 $430 $2,242 $599 $2,515

Rail transport investment $2,099 $123 $3,403 $1,965 $2,741

Road transport investment $626 $386 $1,132 $1,012 $325

Total capital costs $3,344 $938 $6,778 $3,575 $5,580

Agglomeration benefits $27 $27 $27 $27 $27

Amenity benefits $919 $919 $919 $919 $919

Consumer welfare benefits $9 $9 $9 $9 $9

Producer welfare benefits $3 $3 $3 $3 $3

Total benefits $957 $957 $1,009 $957 $1,579

Total costs $7,209 $4,661 $8,303 $7,804 $3,561

58

6.5 Operating costs dominate for existing port options

The composition of total costs for all options is shown in Figure 14. The figure confirms the

preponderance of capital costs for the ‘new’ port options, especially Manukau where capital costs are

responsible for approximately 95 per cent of total costs. For the ‘existing’ port options operating costs

account for a maximum of 80 per cent of total costs for Tauranga to a low of 18 per cent for the Firth

of Thames.

Figure 14 Cost breakdown by option, Calibrated forecast (PV, $m)

Source: Sapere

6.6 Amenity gains to households dominate land

redevelopment benefits; ‘new port’ options have

additional operational benefits

The composition of total benefits is shown in Table 13 below. Clearly, the overwhelming majority of

benefits arise due to amenity-based impacts from relocation of freight operations. These amenity

benefits, described further below in the section on alternative land use, account for 96 per cent of

total estimated benefits for the Northport, Tauranga and combined Northport/Tauranga options. The

equivalent share for the Firth of Thames is 91 per cent, while amenity benefits account for 58 per cent

of benefits for the Manukau option.

59

Table 13 Composition of benefits, Calibrated forecast (PV, $m)


Agglomeration benefits $27 $27 $27 $27 $27

Amenity benefits $919 $919 $919 $919 $919

Consumer welfare benefits $9 $9 $9 $9 $9

Producer welfare benefits $3 $3 $3 $3 $3

Rail freight movement benefits $159

Road freight movement benefits $314

Traffic congestion benefits $51 $127

Emissions benefits $16

Safety benefits $5

Total $957 $957 $1,009 $957 $1,579

Source: Sapere

Direct amenity benefits arise from the public being able to enjoy recreational activities (or the

possibility of such) from development of parkland on the current site following relocation of freight

operations. Indirect amenity benefits accrue to Auckland households who are in favour of the freight

operations moving from the current site. In essence, this is the willingness-to-pay of these households

for the freight operations to move.

We were unable to undertake detailed survey work to elicit estimates of these benefits, but applied

analogous benefits estimates from studies overseas to the current situation:

• The $27 million in agglomeration benefits is essentially the productivity gain to businesses

who locate on the former freight operations site, due to greater effective density and co-

location possibilities.

• Consumer welfare benefits accruing to residents who live in the apartments assumed to

form part of the redevelopment represent what is known as a ‘consumer surplus.’ This

benefit was calculated by estimating the demand curve for the apartments and their likely

sales prices and measuring the extent to which the willingness to pay for the apartments

exceeds the price paid for them.

• A similar equation is estimated on the supply side to estimate the willingness of producers

in this case developers and builders to supply apartments for less than the amount paid for

the apartments.

The Firth of Thames and Manukau ‘new port’ options both give rise to traffic congestion benefits,

while the Manukau option also sees benefits, relative to the status quo of avoided operating costs

including externalities (i.e. safety, emissions, traffic congestion). In total the reduced operating costs

account for 39 per cent of total estimated benefits for Manukau.

60

6.7 Environmental and transport safety externalities

The public are reasonably concerned with the environmental and transport safety impacts of major

developments. The current economic analysis includes externalities including road and rail

greenhouse gases and air pollution and road safety for truck road use based on truck vehicle

kilometres travelled (Sapere Research Group, 2020f). These analyses focus on operational externalities

– “capitalised” externalities such as embedded GHG emissions in port construction cannot be

estimated on the high-level concept plans for each option and would be part of detailed feasibility

analysis of preferred options.

For comparison of the relative impacts between the current options under consideration, the following

tables show the total addition emissions and road deaths and injuries over the analysis period (2020-

2079). These volumes are monetised in the CBA as shown in Table 12.

• Results for environmental emissions: Table 14 shows the volume of environmental

emissions in tonnes relative to baseline. Annualised the Northport and Tauranga options

result in an additional 200-230 thousand tonnes CO2 per annum compared with a

reduction of 13 thousand tonnes CO2 per annum for Manukau.

Table 14 60-year additional environmental emission relative to baseline (tonnes)9

Northport Tauranga Firth of

Thames

Northport and

Tauranga Manukau

Rail CO2 2,291,035 3,399,309 496,579 2,955,999 -74,487

Estimate Rail Last Leg CO2 401,670 708,736 406,127 585,910 -219,587

Truck CO2 9,388,863 9,765,522 1,417,589 10,103,669 -492,103

Truck NOX 27,806 26,968 4,157 28,507 -2,772

Truck PM10 1,106 1,086 158 1,144 -114

Truck CO 7,199 7,056 1,093 7,434 -710

Truck HC 874 846 140 897 -124

Source: Sapere

• Road safety implications: Table 15 shows the road safety impacts over the same period.

Annualised the Northport and Tauranga options result in an additional 3 to 3.3 deaths per

annum compared with a slight reduction for Manukau.

Table 15 60-year additional road safety incidence relative to baseline

Northport Tauranga Firth of Thames Northport and

Tauranga Manukau

Additional Deaths 181 189 27 195 -9

Additional Serious Injuries 496 517 75 535 -26

9 The environmental analysis follows the NZTA Economic Evaluation Manual

61

Additional Minor Injuries 1,826 1906 276 1971 -96

Source: Sapere

Rail safety externalities have not been calculated because the current incidence is very low nationally

and the incremental change due to the different port options will be insignificant.

6.8 Sensitivity and scenario testing show discount rate and

timing most influential

We subjected the core results above to a range of tests, starting with the discount rate used. Recall

that the recommendation of Treasury is to apply a discount rate of 6 per cent to analysis of the types

of investment involved in relocation decisions of this kind. We test the effect of lower (i.e. 4 per cent)

and higher (i.e. 8 per cent) discount rates.

We also test the effect of adding a 15 per cent contingency to capital costs. Finally, we test the

sensitivity of results to timing changes. In particular, we: shorten the transition period for the

relocation by reducing the construction time from 10 years to 5 and the time for full relocation of

freight from 5 years to 2 (effectively bringing forward the move by 7 years).

Appendix B contains the details of results of sensitivity analysis for discount rate changes and the

timing change as the remaining sensitivity tests were largely inconsequential.

6.9 Hastening the relocation of freight operations

improves BCRs but worsens net benefits for all but the

Manukau option

Table 16 presents the effects, using the calibrated freight forecast, of reducing the construction time

for the port relocation from 10 years to five and the time for full relocation of freight from five years

to two (effectively bringing forward the move by seven years).

The effect is to improve the BCRs but worsen the net benefits (rise net costs) across all options except

Manukau, which sees net benefits improve slightly. Qualitatively, this is much the same effect as

lowering the discount rate. The explanation for such effects is similar: benefits rise proportionally more

than costs (lifting the ratio of benefits to costs). However, the size of costs means that, in absolute

terms the effect of the lower proportional change in costs essentially swamps the rise in benefits,

leading to a worsening of net benefits to society for all but the Manukau option.

Focussing again on the Manukau option we see that benefits rose by around 39 per cent while costs

rose by around 17 per cent. Net benefits rise by around 2 per cent, while the BCR improves by about

20 per cent.

62

Table 16 CBA sensitivity results for shortened construction and transition, Calibrated forecast (PV, $m)

Northport Tauranga Firth of Thames

Northport and

Tauranga Manukau

Core Quicker Core Quicker Core Quicker Core Quicker Core Quicker

Total benefits $957 $1,375 $957 $1,375 $1,009 $1,441 $957 $1,375 $1,579 $2,191

Total costs $7,209 $8,970 $4,661 $6,001 $8,303 $9,682 $7,804 $9,785 $3,561 $4,134

Net benefits -$6,252 -$7,595 -$3,703 -$4,626 -$7,294 -$8,241 -$6,847 -$8,410 -$1,982 -$1,943

BCR 0.133 0.153 0.205 0.229 0.121 0.149 0.123 0.141 0.443 0.530

Table 17 CBA sensitivity results for shortened construction and transition, Officials' agreed forecast (PV, $m)


Northport and

Tauranga Manukau

Core Quicker Core Quicker Core Quicker Core Quicker Core Quicker

Total benefits $957 $1,375 $957 $1,375 $1,009 $1,441 $957 $1,375 $1,384 $1,961

Total costs $5,878 $7,400 $3,168 $4,242 $7,930 $9,190 $6,645 $8,360 $3,581 $4,103

Net benefits -$4,921 -$6,025 -$2,210 -$2,867 -$6,921 -$7,749 -$5,688 -$6,985 -$2,197 -$2,142

BCR 0.163 0.186 0.302 0.324 0.127 0.157 0.144 0.164 0.386 0.478

63

6.10 Real options approach has potential to alter results but

quantitative modelling not possible in timeframe

Port capacity decisions contain considerable uncertainty.10 It is very difficult to attach probabilities to

the possibility of particular events happening, such as COVID-19; changes in market or consumer

sentiment and relevant technology (e.g. the effect of containerisation has been monumental but was

not predicted). This feature distinguishes uncertainty from risk.

Port capacity and/or location decisions are generally expensive and irreversible. Analytical methods

drawing on Discounted Cashflow (DCF) techniques and associated present value calculation are a key

component in investment decision-making, often through the use of cost benefit analysis.

The effect of using such techniques is that decisions are made at a particular point in time, in a yes/no

manner based on information available at the time. While that information can be risk-adjusted, it is

still a guess as to what the state of information is likely to be in the future.

If new information emerges after the project has begun, that information could be useful to inform

the investment decision, but only if there is an opportunity to use the new information (e.g. if

investments are staged and later investment decisions can be confirmed some time after the project

has commenced). This is the so-called “real option” which is a derivative of a financial option that

involves “the right but not the obligation” to buy/sell an instrument at a specified price and time.

For various reasons, this staged decision-making process is not necessarily the norm, so it is not

possible to beneficially exploit new information in investment terms once that information is known

(i.e. the real option is lost).

In general terms, relying solely on the information that is available at a point in time to make

investments that are complex and expensive (e.g. infrastructure), could be sub-optimal. For this

reason, decision-makers behind a new port or large port would likely combine DCF analysis with some

level of discussion around the project’s “real options”.11 Real options can take several forms:

• The option to expand or downsize a project in response to changing demand – a staged or

modular approach creates options to expand or contract in the light of information

emerging after commencement.

10 Uncertainty refers to a situation where an event is imaginable, but its probability is unknown—a ‘known

unknown’ in the words of Donald Rumsfeld. In contrast, risk refers to a set of possible outcomes with known

probabilities attached. The critical difference between risk and uncertainty is that risk can be insured against;

whereas insurance is more difficult, if not impossible, with uncertainty. The inability to insure against uncertainty

makes it more damaging from the point of view of the firm. More specifically, for valuation purposes we refer to

Knightian risk and uncertainty, being that ‘risk’ is randomness with known probability distributions and

‘uncertainty’ is randomness with unknown probability distributions. (LeRoy, Stephen F., and Larry D. Singell.

"Knight on Risk and Uncertainty." Journal of Political Economy 95, no. 2 (1987): 394-406) 11 The Real Options approach is recognised in the Ministry of Transport’s analytical framework for decision-

making. The framework acknowleges the usefulness of a real options approach for decisions with high

uncertainty but where better information may become available, for irreversible investment opportunities with

longer horizons, for projects that can be structured into multiple stages with opportunities after each stage to

continue, alter or delay. < https://www.transport.govt.nz/multi-modal/keystrategiesandplans/strategic-policy-

programme/real-options/>

64

• The option to defer investment – If demand is uncertain the decision maker can exercise

the option to defer the project until the uncertainty is resolved, to avoid committing to

potentially redundant investment if demand turns out to be low.

• The option to abandon or temporarily shut down staged investment – If new information

indicates lower demand than first thought, the decision maker can exercise the option to

abandon or mothball future stages of the project.

• The option to switch the way demand is met – It is worth trying to keep open the option of

changing a project to take advantage of new technology or information that may become

available.

Each of these options – expansion, downsizing, deferral, abandonment and modification – adds value

to a project by allowing decision makers to exploit upside opportunities (e.g. project expansion) while

limiting downside losses (e.g. abandon or downsize). Indeed, some projects that would fail an up-front

DCF analysis (equivalently have a BCR less than one) may go ahead when real options are considered,

where there is flexibility to manage the downside.

Formal modelling of the value of options has shown that these options can be more significant than

the NPV of the project itself. It is not always necessary to explicitly model real options, but it can be

useful to reflect on how they can change the economics behind whether to invest in a project or how

to stage it.

In the time available to complete this work, quantitative modelling was not feasible. We can, however,

apply the lessons from available literature to the decision at hand.

Qualitative, high-level assessment of real options suggests

‘new port’ options favoured

There are four broad lessons from the options literature that we think are useful for this analysis:

• doing nothing may not always be harmful – if delaying resolves uncertainty, then the value

of waiting may exceed the costs

• multi-stage projects increase the possibility that new and valuable information comes to

light

• policy or regulatory uncertainty can destroy value

• partial or full public ownership often results in earlier and larger investments in port

capacity.

On the face of it, viewing the alternative candidates for relocation of Auckland’s freight operations

through a real options lens would tend to favour ‘new port’ options, as:

• they appear amenable to staging (i.e. it is not necessarily a one-shot game) as the

opportunity cost of delay may not be as material as it would be for the existing ports who

have stakeholder demands and existing clients to satisfy

• any ownership issues can be determined on a ‘clean sheet’ basis and policy certainty

enhanced in a more manageable way

• they already contain an inherent delay, due to planning, consenting and design

requirements.

65

7. Alternative land use at POAL

If the POAL site is vacated, it is highly likely that the site will be redeveloped. Work by Warren and

Mahoney, undertaken to inform the 2019 study, suggested that the site could be used for a mixed-use

development, including residential, hotel, commercial and retail uses, as well as significant area set

aside for public space.

Our approach builds on that work by Warren and Mahoney, which is considered sound and

reasonable. We apply the following assumptions for this study. These assumptions have informed

several elements of this work, including the traffic modelling and land value estimates.

Table 18 POAL redevelopment land-use assumptions

Category Gross floor area or apartments Employees or residents

Residential 5,800 apartments 11,600 residents

Commercial 227,5002 11,380 employees

Hotel 600 rooms included above

Retail 20,200m2 2,525 employees

Source: Warren and Mahoney (2019); adapted by Flow and Sapere

This section starts with a description of the derivation of amenity values from more general alternative

land use in Auckland (i.e. not having freight operations on the existing site). We have used these

values as a proxy for social licence effects. We then examine the traffic impacts of the proposed

alternative land use more specifically.

7.1 Relating social licence to amenity from alternative land

use

Social licence to operate is a broad concept, only relatively recently appearing in New Zealand.

The concept of social licence to operate (SLO) appears to be at the heart of the desire to relocate

freight operations from their current site on the Waitematā Harbour. Sometimes called ‘licence to

operate’ or just ‘social licence’, it emerged out of the need for the mining industry to recover its

reputation after a series of highly publicised environmental disasters and the community conflict that

followed, in the mid-1990’s. SLO first appeared in New Zealand literature and media in 2012 (Edwards

& Trafford, 2016).

There is currently a lack of clarity around what exactly SLO means and what its characteristics might

be.

Edwards and Trafford (2016) state that a common theme around what it means to have a SLO in

relevant industries (e.g. mining, forestry, agriculture, aquaculture, gas and oil) is broad – ongoing local

community and stakeholder approval or social acceptance of the activities of a corporation.

Notwithstanding the difficulty describing in exact terms what having a SLO means, the emerging

66

importance of the concept demonstrates the concern that society has for how our resources are

developed and used.

Some components of SLO include the following (Boutlier, 2014):

• perceptions of legitimacy, credibility and fairness

• trustworthiness

• general acceptance of a project or activities

• quality and quantity of contact with organisation undertaking relevant activities

• impacts on environmental and social infrastructure

SLO can be both tangible and intangible. In relation to the former, approval or opposition expressed

by a community can be felt in significant ways, while the intangible element arises because SLO is not

like a legal permit or authority to undertake activities (Edwards & Lacey, 2014).

In a New Zealand context, a review of SLO found that most New Zealanders want economic growth

but at the same time they want to protect the environment as this underpins their quality of life. This

result holds even if it comes at the cost of slower economic growth and jobs (Sustainable Business

Council , 2013). The authors state that:

New Zealand consumers want business to focus on social and

environmental performance, as well as profit, and say they will

switch products and services if they found that a product or

service was having a negative effect on the environment,

people, society or otherwise behaving unethically.

Finally, the paper highlights that New Zealanders’ think that the environmental issues most in need of

addressing to live up to our overseas marketing messages (i.e. where they see potential SLO issues

arising internationally) are associated with:

• water quality of lakes, rivers and coastal areas

• farm run-off

• waste disposal

• mining impacts on national parks and forests.

Relevance of SLO to current study is through amenity

values…

On the face of it, there may be questions around the relevance of SLO to freight operations of POAL

on the Waitematā Harbour. There has not been an environmental disaster in recent memory, nor any

strong sense that POAL has acted in a manner that is inconsistent with the requirements to maintain

SLO.

However, there is some, perhaps additional dimension that means social licence is relevant to the

freight operations where they currently are in Auckland. A survey conducted in June 2019 for the

Working Group showed that up to 72 per cent of Aucklanders surveyed would prefer Auckland’s cargo

67

port to move to a new location.12 By implication, 28 per cent of Aucklanders surveyed would prefer

that Auckland’s cargo port remain where it is (Colmar Brunton , 2019).

Clearly there is some support across Aucklanders for the relocation possibility. The contention here is

that this support is grounded in notions of SLO. More particularly, this characterisation of SLO can be

represented in terms of costs and benefits.

The dimension that most fits for the current analysis is that of amenity value, which could be

described as the characteristics that influence people’s appreciation of a particular area. In blunt

terms, the port could currently be seen as an eye-sore whose activities consume the harbour and act

as a barrier between the city and waterfront.

Removing freight operations would effectively switch the amenity value from being negative currently

to positive in future. Thus, it is possible to include SLO considerations in the current analysis by

reference to possible amenity values.

…but directly applicable values not available; inference used

based on analogous figures in literature

Unfortunately, there are no ‘off the shelf’ amenity value figures relevant to freight operations at a New

Zealand seaport that we can draw on. In the absence of directly applicable values, we looked to the

literature for examples where analogous values had been calculated.

Table 19 contains a summary of the most relevant articles we were able to source.

Table 19 Summary of relevant studies valuing externalities

Source Topic area Finding

(Sal Salazar & Garcia-

Menendez, Port expansion

and negative externalities: a

willingness to accept

approach, 2016)

Negative externalities borne by

local residents from port

expansion (Valencia, Spain)

Median willingness-to-accept

the consequences of port

expansion of €121.66 per

annum per household


Menendez, 2005)

Non-market benefits of an

urban park (Valencia, Spain)

Residents closer to the park

derive benefits that are 44 per

cent greater than those

residents with lower proximity

(Fleming & Ambrey, 2011) Valuing scenic amenity using

life satisfaction data (Australia)

Willingness-to-pay of

AUD$12,000 per household per

annum to obtain a one unit

improvement in scenic amenity

12 The survey showed that 55 per cent expressed a preference for the cargo port to be moved, while 17 per cent

were not sure whether they would prefer the cargo port to be relocated. We have combined those two totals to

derive the 72 per cent figure.

68

Source Topic area Finding

(Fransico, 2010) Valuing aesthetic (i.e. visual)

improvements (Philippines)

Households are willing to pay

US$29-US$32 on a one-off

basis to remove billboards


Menendez, 2003)

Valuing the environmental

improvements of redeveloping

port areas for recreation

purposes (Castellon, Spain)

Mean individual willingness-to-

pay of 7,475 pesetas

(Giacarria, Frontuto, &

Dalmazzone, 2016)

Valuing externalities associated

with energy infrastructures

(Piedmont Region, Italy)

Mean willingness-to-pay per

individual of €1,148

The port expansion study by Saz-Salazar and Garcia-Menendez (2016) identified the following

problems perceived by residents as a result port expansion or operations:

• visual impact

• land reclamation

• land reclaimed from the sea

• nuisances affecting nearby residents (e.g. noise, pollution, congestion).

Of particular interest to this study is the finding that the most important concern for survey

respondents in that study is the ‘reclamation of land from the sea’ problem. Unfortunately, their

empirical estimates of willingness-to-accept negative externalities from port expansion is not

disaggregated by the type of problem.

Other notable findings from the studies are that:

• the main approach used is contingent valuation, to elicit willingness-to-pay (WTP) or

willingness-to-accept (WTA) measures

• results are highly sensitive to survey methods and models used, raising concerns around

generalisability

• the ability to control for well-known potential biases is mixed

• the results of the studies are a contribution to a growing area of research, rather than the

final word

• relevant values (either WTP or WTA) are non-linear with respect to incomes and proximity

to the activities or proposal under study.

While acknowledging these caveats, we see merit in attempting to translate findings to the current

enquiry.

Port-related studies most relevant, supplemented by scenic

amenity insights

Of the studies in the table above, two are port related. Both studies are by the same authors, for port

expansion in Valencia and redevelopment of dockland areas for recreation purposes in Castellon. The

69

former study uses a WTA approach while the other uses a WTP approach. These studies provide a

range for the monetisation of greater amenity.

We start with initial values of 7,475 Spanish pesetas (in 2003) for the WTP of individuals over 18 for

redeveloping dock land for recreation purposes and €121.66 per annum per household WTA (in 2016)

for port expansion. Using available income growth figures and purchasing power parity exchange

rates we were able to convert these amounts to New Zealand dollar equivalents in 2019.13

We then aggregated these household estimates by applying the values to Auckland on a relevant

household basis, by using the total estimated number of households in Auckland multiplied by the

share of Aucklanders who preferred the freight operations to move. Based on census data, for 2001-

13 we assume a constant annual growth rate for household numbers in Auckland and project that out

60 years. We then calculate the present value of the stream of calculated benefits to arrive at figures

for the possible benefits felt by Aucklanders as a result of relocation of freight operations. These

figures sum the values from 2045, as that is the year after no further freight operations will take place

as modelled in the analysis.

7.1.3.1 Non-use amenity benefits could be $820m-$1 billion in present value

terms; we use mid-point in CBA

Table 20 shows that the present value of potential amenity benefits that could accrue to Auckland

households would lie in the range $820 million-$1,007 million.

Table 20 Key parameters for estimating amenity value range

Low High

2019 NZD values (Household WTA or WTP) $310.13 $380.81

Total number of households in Auckland 540,000 540,000

Proportion of Aucklanders who want freight port to move 72% 72%

Relevant households who will derive benefit (2019) 388,800 388,800

Average annual growth rate of HH’s 2001-2013 (Census data) 1.7% 1.7%

Undiscounted total amenity value from 2045 $12,601m $15,473m

Present value total amenity value from 2045 (6% discount rate) $820.2 $1007.1m

Given the nature of the method used and the subject matter of the proposal, it is possible that such

amenity benefits could arise prior to the modelled date when operations cease. That is, just knowing

that operations are going to cease may result in benefits to households once the announcement is

made. If we assume an announcement is made in 2020, then the present value of amenity benefits

13 https://databank.worldbank.org/indicator/NY.GDP.MKTP.CD/1ff4a498/Popular-Indicators#

https://coinmill.com/ESP_EUR.html#ESP=13472

https://databank.worldbank.org/indicator/NY.GDP.MKTP.CD/1ff4a498/Popular-Indicators

https://coinmill.com/ESP_EUR.html#ESP=13472

70

would fall in the range of $2.8 billion-$3.4 billion. If benefits accrued in this manner, the BCR for

Manukau would be above one in value.

We note that these figures treat Auckland households as homogeneous (i.e. proximity to the harbour

site is not factored into the analysis). We also assume, for consistency purposes, that individuals under

the age of 18 are not relevant to the valuation as was the case in the other studies.14

While an approximation only, we are comfortable that the values estimated give a broad sense of the

potential amenity benefits relevant to freight operations removal from the current site.

For the purposes of the CBA, we have used a mid-point value of around $914 million in present value

terms for the social licence/indirect amenity value benefit. This figure is added to the $5 million in

direct amenity values to derive the total amenity value benefit of $919 million presented earlier in the

report. To this value we add the agglomeration benefits to business productivity and the non-market

gains to consumers and producers to estimate total economic benefits from alternative land use.

7.1.3.2 Using Australian figures on scenic amenity value raises potential benefit

to over $2 billion; viewed as implausible

For the sake of comparison, we used the same basic calculation method for the Australian WTP value

in 2011 of $12,000 per household for a one-unit improvement in scenic amenity (e.g. from very low to

low, or from low to medium). After inflating that value to 2019 terms and applying across estimated

relevant households in Auckland in 2045 we generated a figure of $2.046 billion in present value

terms for potential amenity value benefits. If this value was used, the Manukau option would have a

BCR above one in value.

This is essentially a one-off, single year estimate as the one-unit improvement is not expected to

accrue each year. Assuming that households would benefit as soon as the announcement was made,

this present value figure is estimated to be $5.769 billion, which would mean both Manukau and

Tauranga options had BCRs over one in value.

In our view these estimates are highly questionable. The approach requires Auckland households to

be willing to pay what is in effect over 10 per cent of average household income for the year-ended

30 June 2019 (i.e. average household income was $120,381) in a single year. Such an amount seems to

us implausible, given the availability of scenic amenity in the immediate vicinity of the current site and

the harbour more generally. Such figures are more illustrative rather than instructive.

14 Thus, the individual amenity value estimated was multiplied by two to get a household value, based on the

average size of an Auckland household being three and the share of the Auckland population aged 18 and under

being around a third. https://www.stats.govt.nz/tools/2018-census-place-summaries/auckland-region

https://www.stats.govt.nz/tools/2018-census-place-summaries/auckland-region

71

Offsetting effects at other ports not factored into analysis

due to unique features of Auckland site

Given the estimates used in this part of the work draw on studies estimating the WTA port expansion

and/or WTP for redevelopment of dock land areas, it is natural to question whether the communities

in the regions where relocation might happen have offsetting impacts.

That is, while Auckland households might gain from having the harbour site used for purposes other

than a port, in regions such as Northland and the Bay of Plenty, households might not be as willing to

accept port expansion. In other words, there is no net benefit to society as a whole because relocation

merely transfers costs to other regions.

We make two related points that support a view that there are real benefits from a move and not a

transfer as such. The first is that we are using port expansion or dock land redevelopment as a form of

proxy for amenity, which is itself a proxy measure for social licence.

Expansion is an incremental concept whereas cessation of freight operations completely is a binary

concept. In our view, there is likely to be a significant difference between the two concepts that makes

precision difficult, especially in the time available for this work. Further, in the case of redevelopment

of former dock land, that is either not feasible or desirable in the alternative port locations.

The second, perhaps more important point is that the current site is in the heart of Auckland’s CBD

with significant foot traffic with the Waitematā Harbour often referred to as ‘the jewel in Auckland’s

Crown.’ The current port sites in Northland and Bay of Plenty do not share the same characteristics as

the existing Auckland site; it is unlikely that there would be the same sentiment towards the current

port sites in those regions. Similarly, the proposed Manukau and Firth of Thames sites would not seem

to be held in as high regard.

On balance, we consider that while the prospect of offsetting costs to other locations is a theoretical

possibility, in reality we are probably on safe grounds in not including such potential costs in the

analysis.

7.2 Modelling congestion impacts

Two redevelopment scenarios were tested to determine the traffic generating potential, relative to the

base case where the POAL freight activities remain at the current location.

• The first scenario is one in Table 18 above (i.e. with 5,800 apartments, and hotel,

commercial, retail businesses for a total of almost 14,000 employees), sourced from the

Warren and Mahoney 2019 study.

• The second scenario represents 50 per cent of this level of development without hotel

development (i.e. 2,900 apartments, commercial/retail for a total of almost 7,000

employees).

These scenarios were tested using standard traffic models under two freight forecast scenarios, where,

in the base case, port traffic activity increases in line with the calibrated freight forecast and the

72

Officials’ agreed forecasts. The output takes the form of the number of vehicle movements and

average speeds.

Congestion is unlikely to improve in the event of a move and

may be worse

The results of the traffic modelling are shown in Table 21 below. The effect on the operation of the

road network of a car or light goods vehicle is less than a large truck. Therefore, all vehicles have been

converted to passenger car units (PCUs) using a standard factor of 2 or 3 for large trucks (with cars

being 1 PCU). The model horizon extends to 2048 and results are show for that year.

The modelling indicates:

1. The total PCUs under the lower intensity redevelopment scenario would be similar to what

would otherwise occur under the base case with the calibrated freight forecast scenario for

POAL.

2. However, under the plausible higher intensity redevelopment scenario, the total PCUs would

be significantly greater in number than what would occur under the calibrated freight forecast

scenario for POAL. It should be noted that the higher intensity redevelopment scenario does

not represent an upper bound for the level of redevelopment intensity that could plausibly

occur.

These modelling results arise even with the assumption that significant proportions of residents and

employees would be likely to travel by modes of transport other than the private car to and from this

central Auckland site.

We acknowledge that traffic associated with the POAL operations are relatively consistent throughout

the day, whereas traffic associated with the redevelopment scenarios will be more heavily

concentrated toward the weekday morning and evening peaks.

7.3 POAL congestion effects may be unacceptable without

shifting more freight to rail

Table 21 shows the growth in the number of trips (measured in PCUs) from the POAL site by 2048

compared to existing trips. The doubling in the number of trips from the POAL site over this time

should be emphasised. While it may be possible for a greater proportion of freight to be carried by

rail, if the POAL operations remain in central Auckland, freight trips by road will be considered as

essential, and congestion for these essential trips may be considered to be unacceptable.

Table 21 also shows the further increase in traffic due to site redevelopment, including percentage

changes relative to the base case in 2048. Again, this approximately doubles the total volume of traffic

with, for example, a seven-fold increase in evening peak car traffic. The lower intensity development

option slightly decreases the total traffic in this year, with increased car trips offset by decreases in

truck trips.

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Table 21 Movements from POAL site in passenger car units, in 2048 (PCUs per hour, two way)

Scenarios Inter-peak PCUs Evening peak PCUs

Cars Trucks Total Cars Trucks Total

Existing (2020) 160 470 630 170 500 660

Base case (2048)

(calibrated forecast)

320

(100%)

950

(102%)

1250

(98%)

340

(100%)

1030

(106%)

1370

(108%)

Redevelopment

(higher intensity)

2170

(578%)

130

(-86%)

2300

(84%)

2450

(621%)

150

(-85%)

2600

(90%)

Redevelopment

(lower intensity)

1090

(241%)

70

(-93%)

1150

(-8%)

1220

(259%)

80

(-92%)

1300

(-5%)

Source: Flow Transportation Specialists

Average traffic speeds would be lower

The results of these forecast flows associated with the POAL site have been assessed in the Auckland

City Centre SATURN model. This model has a furthest horizon year of 2036, so this year has been used

for the assessment. The ATAP assumption, that the grade separation of intersections along Grafton

Gully (at The Strand and Alten Road) would occur has been included in the model.

Table 22 below summarises the average travel speeds in the Auckland City Centre under two

redevelopment scenarios for the year 2036. By this year the general increase in CBD traffic will reduce

average travel speeds between 18 to 27 per cent. In the event the site is redeveloped, increased

congestion will further reduce CBD travel speeds. The key finding is that average travel speeds in the

Auckland City Centre are likely to be lower under the higher intensity redevelopment scenario by 7 to

12 per cent than what would otherwise occur in 2036 under the base case.

The above speeds relate to the averages within the entire model, so the results may under-represent

the extent of congestion in particular areas. However, the model outputs indicate the extent to which

the higher intensity redevelopment scenario will lead to lower vehicle speeds in the city centre.

Table 22 Average Travel Speeds in the Auckland CBD, 2036 (km per hour)

Scenarios Morning peak Inter-peak Evening peak

Existing (2020) 22.4 34.1 18.9

Base case (2036 calibrated forecast) 16.9 (-25%) 27.8 (-18%) 13.8 (-27%)

Redevelopment (higher intensity) 16.3 (-7%) 25.8 (-9%) 12.7 (-12%)

Redevelopment (lower intensity) 17.2 (-2%) 27.5 (-2%) 14.2 (-2%)

Source: Flow Transportation Specialists

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8. Comparison with Working Group findings

In this chapter we investigate the divergence between the findings of this analysis and those of the

Working Group. The purpose for this comparison is to allow decision-makers to understand the basis

for the Working group report as well as where and why the current analysis departs from that work.

We acknowledge that the current analysis was at something of an advantage relative to that

completed for the Working Group in terms of time and resource availability. In particular, the current

analysis has access to:

• specialist independent capabilities in the traffic modelling, freight movement and supply

chains, shipping logistics, port planning and engineering, resource consenting and

environmental assessment

• agency inputs from AC, AT, NZTA, Kiwirail, on top of the Oversight Group members

• representatives of the Cornerstone Partners and other associated organisations (e.g. local

government) both remotely and through site visits

• other relevant stakeholders such as shippers, freight forwarders and manufacturers of

freight products.

8.1 The Working Group identified Northport as the

preferred location; Tauranga the worst, Manukau not

modelled

The Working Group considered scenarios presented in a CBA by EY (EY, 2019). Table 23 indicates that

Northport is the only scenario where society is made better off, relative to the base case of freight

operations in Auckland remaining at their current site. Specifically, benefits are twice the costs and

society is better off by around $1.7 billion, in present value terms, over the 30-year analysis period.

The Tauranga scenario performs worst and would result in society being worse off by almost $3.2

billion in present value terms over the 30-year analysis period.

Of note is that no Manukau option was modelled, despite the results of the 2016 Port Futures Study

highlighting that Manukau was the preferred location.

Table 23 Summary results of EY analysis, 2020 to 2050 (PV, $m)

Scenario 2.1 - Full

move to

Northport

Scenario 2.2 - Full

move to Tauranga

Scenario 2.3 - Full

move to Firth of

Thames

Scenario 2.4 - Full

move to

Northport and

Tauranga

Total benefits $3,464 $362 $553 $1,913

Total costs $1,776 $3,526 $3,417 $3,370

Net benefits $1,688 -$3,164 -$2,864 -$1,457

BCR 2.0 0.1 0.2 0.6

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8.2 Comparisons at analytical level reveal key differences

in characterisation of benefits and calculation of costs

For explanatory purposes we used detailed cost and benefit figures from the underlying model

utilised by the Working Group (and ourselves) to compare respective estimates for the Northport

option.15 As indicated earlier, the Working Group did not model a Manukau option, so there is

nothing to compare to. The remaining options perform relatively poorly in both analyses, so there is

little to be gained from any comparison.

The key areas of comparison are as follows:

• road investment costs

• road user costs

• rail investment costs

• rates and leasehold income benefits

• economic costs of using the tax system

• alternative land use benefits.

In addition, there are other less material differences in the estimated values for traffic congestion,

emissions and safety, all of which are closely related to differences in distances travelled.

The current study covers 60 years, while the Working Group

report was for 30 years, so big differences to be expected

Table 24 contains the most basic comparison with the EY results. The table shows a difference of over

$5 billion in present value terms between the estimated costs of the Northport option produced in

this study versus the Working Group estimates.16

With estimated benefits diverging by over $2 billion, it is not surprising that the BCRs are substantially

different. We examine the major reasons for this difference below.

Table 24 Comparison with Working Group findings for economic analysis of Northport (PV, $m)

Benefit/cost category Sapere Working Group/EY Difference

User costs: Rail $881 $262 $619

User costs: Road $2,023 -$1,166 $3,189

Congestion $104 -$99 $203

Emissions $188 -$23 $210

15 We note that the figures in the spreadsheet model do not coincide with those in the published report. We rely

on the spreadsheet model as it is more detailed than the published report and is, to the best of our knowledge

the most up-to-date source of cost and benefit data. 16 Appendix A provides similar comparisons between the current and Working Group economic analyses for

Tauranga, Firth of Thames and split Northport and Tauranga. The Working Group did not include the Manukau in

its economic analysis.

76

Benefit/cost category Sapere Working Group/EY Difference

Safety $105 -$22 $127

Deadweight costs $565 NA -$565

Total operating costs $3,865 $262 $3,603

Port Capacity Investment $619 $644 -$24

Rail transport investment $2,099 $933 $1,166

Road transport investment $626 -$1,355 $1,981

Total capital costs $3,344 $1,577 $1,767

Rates income benefit NA $313 -$313

Leasehold income benefit NA $412 -$412

POAL Dividend benefit NA -$147 $147

Agglomeration benefits -$27 NA $27

Amenity benefits -$919 NA $919

Consumer welfare benefits -$9 NA $9

Producer welfare benefits -$3 NA $3

Total benefits -$957 -$3,390 $2,433

Total costs $7,209 $1,986 $5,223

BCR 0.13 1.71

8.3 Several other material differences:

We see other differences as follows:

• Re-sequencing road infrastructure projects are counted by the Working Group as economic

benefits, when they shouldn’t be, eliminating $1.4 billion of claimed benefits

Avoided costs are a valid inclusion as a benefit in a CBA (Treasury , 2015). By avoiding costs, the

resources that would have been consumed by undertaking a particular activity are available for

use elsewhere. A common example is avoided illness costs of a health intervention: the where a

preventive action reduces illness, that costs of that illness to the health system and/or individuals

or society more generally that would otherwise have been borne are counted as benefits from the

intervention.

The EY analysis for the Working Group ascribed benefits to the ability to avoid costs of road

infrastructure projects by delaying the projects due to the relocation of freight operations. It is not

that the projects would not be needed at all as a result of the relocation, but that they would not

be needed until later in time, resulting in cost savings. The time period used for the Working

group analysis effectively meant that the entire costs of some roading investments was avoided

(as the ‘re-entry’ of costs subsequently fell outside the study period).

77

In our view, the best characterisation is of delayed costs rather than avoided costs. Normally, there

may be some beneficial impacts in terms of the time value of money. That is, by avoiding

expenditure in one time period, interest payments are avoided, or the money is able to be

invested and earn a return until it is needed to be spent.

Similar arguments hold, but in the opposite direction, for projects that are brought forward as a

result of the relocation. Neither bringing forward or pushing back projects should be counted in a

CBA as effectively avoiding the costs entirely and hence the benefits counted by the Working

Group (amounting to almost $1.4 billion over the 30-year period of their analysis) should not be.

In the context of the respective analyses, the current work departs from the EY work in that we do

not find support for the notion of including benefits for road investment project deferral in our

calculations. They are not avoided costs in an economic sense. We do, however, account for

timing changes in the provision of infrastructure in our analysis, but only as it affects costs

through the discounting process, though this is not separately specified (i.e. it is netted off from

the relevant cost line item).

• Mode share and composition of trip assumptions drive road user costs substantially apart;

correcting inconsistent treatment removes $1.2 billion in benefits from Working Group

findings relocation

The Working Group estimated that there would be road user cost savings from moving Auckland

freight operations to Northport. The key to this finding is that the total distance travelled (i.e. vkt)

would be lower for Northport than it is at Auckland presently. This distance is affected by mode

share differences between the current situation and the Northport option, as well as the current

length of trips from the Auckland site (i.e. the status quo) and from Northport.

The Working Group used a weighted average truck trip distance for the Auckland status quo of

around 81 kilometres. They also assumed a rail share of 6.5 per cent for the Auckland status quo.

The combined effect of these two factors makes Northport more attractive as far more freight is

transported using rail (70%), which reduces the effective total distance travelled by road per unit

of freight relative to the status quo, leading to cost savings.

Examination of the composition of the trips used to derive the 81-kilometre estimate indicated

that a key driver of this figure was a 9 per cent proportion of road trips in the base case that were

destined for Wellington. The basis for this destination was not able to be established.

Furthermore, trip numbers in the Northport scenario were assumed by the Working Group

analysis to be split evenly between Massey and Wiri. That is, the share of trips destined for

Wellington (and indeed other locations around Auckland) effectively disappear and are re-routed

to Massey or Wiri. The effect of this is to reduce the average trip distance as a result of relocation

to Northport, relative to the status quo. Hence, benefits to road users arise.

The current study modifies the calculations in two ways. Firstly, the proportion of trips destined for

Wellington are removed and reallocated to other Auckland locations in both the base case and

alternative. Secondly, trips in the Northport option are allocated to the same destinations as in the

base case (i.e. rather than assume trips re-route to Massey or Wiri, trips are assumed to be

destined for the same locations as in the base case).

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The effect of removing the proportion of trips destined for Wellington is to reduce the base case

trip distance to almost 21 kilometres. This 21-kilometre distance is above that estimated by

specialist transport modelling, but is internally consistent, based on a conservative stance.17

The effect of reallocating trips in the Northport option on the same basis as the status quo

locations for trips had a modest impact on the estimated trip distance form Northport, raising it

by almost four kilometres per trip (i.e. from 150.5 kilometres in the Working Group analysis to

154.25 kilometres in the current study).

The adjustments were designed to be as close to the Working Group as possible, with the

exception of the unsupported Wellington trip share, as well as being consistent and realistic. The

combined effect is to add a total of around 64 kilometres to trips from Northport, relative to the

base case.

As a result of these adjustments and an estimated rail mode share of 50 per cent estimated by

freight experts, the cost savings estimated by the Working Group of $1.2 billion are reversed and

additional costs of around $2 billion are estimated.

Ultimately, experts can disagree on what the best data and inputs are, and both the current and

Working Group analyses rely on simplifying assumptions around the ultimate destination for

freight in Auckland (regardless of where the freight enters New Zealand). The approach taken in

the current work focusses on consistency, validity and a conservative bias.

• Rail investment is underestimated in the Working Group analysis, including these costs add

around $1 billion to costs

The rail line from Auckland to Northport would need significant upgrading, as well as a new spur

line from Whangarei to Northport and the Working Group largely allowed for this. Relevant

specialist opinion is that the allowance for the Avondale to Southdown line was too low and that

an allowance for a third track alongside the section from Swanson to Avondale should be added,

as well as the addition of passing loops on the line north of Auckland. On that basis, additional

costs should be included in the analysis.

• The current study included costs of using the tax system to fund investment ($565 million)

which the Working Group did not, and the Working Group counted $725 million in benefits

that are not economic in nature

Rates and leasehold income are not economic benefits amenable to inclusion in a CBA

As mentioned above, economic CBA is primarily concerned with changes in real resources, in

terms of their availability and/or use. Economic CBA specifically excludes transfers among parties

where real resources remain unaffected, unless incentives are altered as a result of the transfer,

which might result in resource changes in future (Treasury , 2015, pp. 10,11). This is one of the

areas where CBA differs from financial analysis.

17

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The payment of rates and income received from leases are cash transfers between parties and do

not result in creation or destruction of resources, per se. Therefore, they should not be included in

an economic CBA. That is not to say that these payments are unimportant, only that they are

financial in nature rather than economic. Removing these transfers strips $725 million of

estimated benefits from the Working Group analysis. There is no effect on the findings of the

current study as such transfers are already excluded.

• Accounting for possible distortionary effects from using the tax system to fund

infrastructure investment increases costs by $565 million; the Working Group analysis did

not include such costs

The current study includes so-called deadweight costs, which in this case are the costs of taxation

which is required to pay for the road and rail upgrades necessary under the Northport option. As

well as efficiency costs associated with the process of taking money off one party and using it on

another party, there are also distortionary effects as people look to change behaviour as a result

of the tax/transfer system, resulting in economic (output) costs.

The recommended cost associated with using the tax system in this way is 20 per cent (Treasury ,

2015, p. 15). On the assumption that central government would fund the road and rail

infrastructure upgrades, additional costs of $565 million are incurred.

The Working Group did not allow for such costs in their analysis. To the extent that deadweight

costs are removed (i.e. that private parties fund the necessary investments), costs would reduce by

$565 million (from $7,209 million to $6,664 million) and the BCR for a relocation to Northport

would increase marginally from 0.133 to 0.143.

• The current study includes benefits from alternative land use of $957 million that are not

included in the Working Group analysis

As highlighted above, the relocation of freight operations from the current Auckland site would

give rise to benefits in the form of enhanced amenity, and gains to residential apartment owners

and businesses.

The amenity benefits are direct in nature (i.e. enjoyment of actual users of park land developed

once the relocation takes place) and indirect in nature (i.e. visual, environmental and other psychic

gains to people who would prefer that the freight operations activities took place elsewhere). The

latter is by far the largest contributor to benefits ($919 million, 96 per cent of total amenity

benefits). Such benefits are essentially a proxy for social licence in the current study.

The Working Group analysis does not include such benefits.

8.4 Some gaps could get bigger after trying to equalise

the respective study periods

We highlighted above that the Working Group analysis covers 30 years, while the current analysis

covers 60 years.

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The effect of the different analysis period for the respective studies is not uniform for the main areas

of divergence identified above. For instance, where the calculated impact is differentially signed (i.e.

one study estimates benefits while the other study estimates costs) then the possibility exists of

stronger divergence.

• For instance, if the beneficial impact on road user costs from relocation to Northport found

by the Working Group was to be extended out another 30 years to a 60 year time period,

benefits (shown as negative costs) would rise and the gap between the estimates in the

two studies would also grow.

• The same is not necessarily true for road investment costs even though the estimates in

the respective studies are oppositely signed (the Working Group sees benefits; the current

analysis sees costs). Infrastructure investments of the type needed for this analysis do not

involve ongoing costs, unlike road user costs.

As result, extending the time period for the Working Group analysis out to 60 years would not

automatically give rise to an increase in the gap between estimated values, due to the lumpy nature of

such investments.

For those situations where costs and/or benefits were included in one study but not the other (i.e.

deadweight costs and income streams from land redevelopment), the period for analysis is immaterial.

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9. Estimating supply chain costs

CBA results can give us one view of supply chain costs and another view is an estimate of how supply

chain estimates might change. One of the oft-heard claims in discussions around port relocation and

the movement of freight is that “any lengthening of the supply chain costs, and usually a lot”. Taken at

face value, this would suggest that the option that minimises total distance (however measured)

would be preferred.

A precise answer requires knowledge of the (unit) cost of the supply chain. However, the supply chain

cost per kilometre has not been estimated in New Zealand – and such an exercise to determine the

(unit) cost of the supply chain directly would be the equivalent of the whole UNISCS project.

We have developed an estimate employing a proxy measure derived by summing estimated

freight movement costs by road and rail to freight destination and dividing by the total freight

volume expressed in either TEU or tonnes. 18

𝑆𝑢𝑝𝑝𝑙𝑦 𝑐ℎ𝑎𝑖𝑛 𝑐𝑜𝑠𝑡𝑠 = 𝑇𝑜𝑡𝑎𝑙 𝑐𝑜𝑠𝑡𝑠

𝑇𝑜𝑡𝑎𝑙 𝑓𝑟𝑒𝑖𝑔ℎ𝑡 𝑣𝑜𝑙𝑢𝑚𝑒

We caution that the measure of supply chain cost is for the Auckland freight volumes only across the

current and proposed Upper North Island Ports. To the extent that it is referred to at all, the best

description would be the Upper North Island supply chain costs for the Auckland freight volumes,

excluding congestion costs.

9.1 A wide range for cost per TEU

This section seeks to employ the information available from the data collected for the CBA to address

the question “what are the supply chain costs that individuals/society will face tomorrow as a result of

our decision to move the port?”. All the values in this section are in real 2019 dollars for direct

comparison to today’s supply chain costs.

The estimated supply chain cost per TEU in Table 25 is based on the cost (including social cost) to

move a TEU from the port to that TEU’s final destination.19 In this analysis, the Manukau option has an

advantage over the POAL Waitematā Harbour berths as well as more distant options. The tables below

highlight the advantage that the Manukau option has over not only the other alternatives but also the

current Auckland site, achieving an estimated net saving in costs per TEU. By 2043 there is a partial

transition of freight to the new port, and the estimated cost saving is around $5 per TEU. By 2073 the

transition is complete, and the estimated cost saving is around $7 per TEU or ~7 per cent of the base

case cost per TEU.

18 For clarity, we avoid “freight task” typically understood as including distance and measured in tonne km. 19 This includes multiple destination sites across Auckland. The operating costs of congestion cost externalities

were not able to be included. The congestion modelling is not able to distinguish the additional congestion in the

Auckland CBD from total congestion impacts including the part that relates to trip generation from

redevelopment of the current site. Hence, including total congestion costs would overstate supply chain costs.

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Table 25: Cost $ per TEU (Calibrated) with externalities but excluding infrastructure, (real, 2019)

Year 2033 2043 2053 2063 2073

Ports of Auckland (base case) 94.63 95.42 96.23 97.03 97.82

Northport NA 370.85 443.76 447.68 451.45

Tauranga NA 387.53 465.09 469.39 473.43

Firth of Thames NA 187.79 212.76 214.60 216.38

Northport-Tauranga split NA 388.69 466.76 471.31 475.62

Manukau Harbour (Puhinui) NA 90.03 89.44 90.19 90.93

Source: Sapere

To get a sense of what might be termed the “total supply chain cost” (excluding congestion), we

include a provision for infrastructure. In particular, we spread capital costs (net of terminal values)

shown in Table 26 evenly over the 60-year analysis period as a simple estimate of the amortisation of

the capital costs.

Table 26: Supply chain infrastructure costs $ millions p.a., 60-year analysis period, (real, 2019)

Scenario Calibrated forecast

(net of terminal values)

Officials’ agreed forecast

(net of terminal values)

Ports of Auckland (base case) 1,164 116

Northport 5,169 3,002

Tauranga 3,176 1,554

Firth of Thames 8,724 7,557

Northport-Tauranga split 5,111 3,783

Manukau Harbour (Puhinui) 6,082 5,085

Source: Sapere

Importantly there is no provision for a return on capital or port charges and is subject to simplifying

assumptions about the origin and destination of freight. This reiterates the point that these figures are

an approximation of the true supply chain cost. Table 25 and Table 27 are now consistent with the

core CBA results presented earlier. The current Auckland site is the least expensive option now and

into the future, by 2073 being around $18 per TEU or ~18 per cent of the base case cost per TEU.

The cost per TEU is decreasing with time when infrastructure is included as the even spread of capital

is divided by a larger freight task towards the end of analysis period.

Table 27: Cost $ per TEU (calibrated) with externalities and infrastructure costs, (real, 2019)

Cost per TEU 2033 2043 2053 2063 2073

Ports of Auckland (base case) 108.98 107.02 105.54 104.46 103.72

Northport NA 422.32 485.09 480.68 477.64

Tauranga NA 419.15 490.48 489.66 489.52

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Firth of Thames NA 274.66 282.53 270.30 260.59

Northport-Tauranga split NA 439.58 507.64 503.95 501.52

Manukau Harbour (Puhinui) NA 150.60 138.08 129.02 121.76

Source: Sapere

9.2 Reconciling results of cost per TEU with the CBA

One apparent inconsistency with the core CBA results is that the Firth of Thames option remains the

third cheapest, even after adding capital costs, even though the Firth of Thames is the most expensive

of all the options in our core results.

The reason for this is because the values we have presented here are real, whereas the values in the

core CBA analysis are adjusted for net present value:

• Capital costs of the base case (POAL) are lower and deferred, the first major capital

expenditure under $1.5 billion in 2040.

• Firth of Thames option is unique in that its capital costs are overwhelmingly front loaded

compared to other options, as shown in the table below. This makes the capital costs

appear larger for the Firth of Thames (relative to other options) when adjusted for NPV.

• Additionally, a lot of these capital costs in the Firth of Thames option are offset by high

terminal values. However, these terminal values are incurred in the year 2079 and are

discounted by over 96% in the CBA, rendering them almost insignificant.

In the cost per TEU analysis above the terminal values are not discounted at all and have a significant

impact on the net cost

Table 28: Total Capital Costs in the 2020 and 2030 Decades (real 2019 dollars)

Capital costs (not including terminal values)

incurred in the decades 2020 or 2030

Ports of Auckland (base case) 21,361,830

Northport 9,709,500,000

Tauranga 3,182,900,000

Firth of Thames 17,141,875,180

Northport and Tauranga 9,620,700,000

Manukau 8,724,007,954

Source: Sapere

9.3 Cost per TEU change over time

The costs per TEU change over time as investment occurs:

• Table 28 shows that the capital costs are still significantly higher under the Firth of Thames

option compared to other options. If the real capital costs are higher than the other

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options for the Firth of Thames, why is the cost per TEU the 3rd lowest? Well, initially we

do see the cost per TEU for the Firth of Thames option as the highest.

• But after the port transition has begun, in 2043, we see in Table 25 that that the cost per

TEU dramatically increases for the options with Northport or Tauranga.

The core CBA results also showed total transport costs being higher in the options with Northport or

Tauranga relative to the Firth of Thames option, but not to the extent we see in the cost per TEU. The

reason for this is values are discounted by 68% by the time the port transitions in 2040.

The implications are important. NPV adjustments inflate the Firth of Thames capital costs (as they are

more front loaded than other options) relative to other ports and reduce the impact of the Firth of

Thames option’s lower transport costs relative to the options with Tauranga and Northport. These two

effects are not present in our cost per TEU analysis above, hence, we see the Firth of Thames option

performing significantly better in this cost per TEU analysis.

85

10. Regional economic and social effects

The relocation of Auckland’s freight operations is a significant undertaking, which would represent a

considerable injection of activity to a new location. The EY report for the Working Group did not

examine social impacts in any degree, but did estimate that a shift of freight operations from

Auckland to Northport would result in:

• a $200 million boost to the Northland economy (over 30 years, in present value terms)

• around 2,000 sustained jobs (i.e. not related to the construction of the required supporting

infrastructure).

The EY report for the Working Group indicated that the direct employment impacts from the

relocation are likely to be relatively modest, due mainly to advances in automation. Thus, the

estimated employment figures above relate mostly to supporting industries (i.e. indirect employment).

The Regional Economic Development and Social Assessment workstream was commissioned for two

reasons. The first reason was to extend the work undertaken for the Working Group by EY on regional

impacts to:

• include another relocation possibility for freight operations other than Northport (i.e. Port

of Tauranga)

• apply ‘non-standard’ approaches to the analysis in addition to the more ‘standard’

multiplier-based impact completed previously.

The second reason for commissioning the workstream was to assess the potential social effects of the

relocation of freight operations from their current site on the Waitematā Harbour.

Data availability dictates that the analysis in this working paper proceeds on a regional basis. That is,

no sub-regional data is available and therefore we primarily compare Northland and Bay of Plenty

regions (as the locations of Northport and Port of Tauranga respectively). The Waikato region is

assessed implicitly, rather than as a standalone location as such.

As the Firth of Thames and Manukau options are in the same region as the current site, there is

essentially no impact at the regional level that could reasonably be estimated.

With the regional economic modelling tools available we have identified modest impacts of port

expansion or creation on regional economic development.

On the one hand, the economic stimulus in Northland is much larger than that for Bay of Plenty,

reflecting the relative size of their existing economies. However, the major share of gains is felt in

regions outside where the rise in activity takes place (e.g. in neighbouring locations). Thus, any

impulse felt in Northland would most likely result in greater impacts in Auckland.

10.1 Regional impacts cannot be equated to CBA results

We wish to highlight that the figures estimated in the workstream analysis are distinct from those

produced as part of the CBA. There is a clear distinction between analysis using input-output (I-O)

approaches and CBA. Methods such as I-O analysis produce different ‘raw’ outputs to CBA (i.e. they

report macroeconomic impacts), do not provide clear social decision rules (unlike CBA), do not

86

measure the economic efficiency of an investment and do not include some of the non-market

commodities allowed for by CBA, such as some non-work travel time savings (Wallis, 2009).

In saying this, I-O analysis could be used as a complement to CBA at the regional level if there is a

need to assess economic impacts (e.g. on GDP or employment) as opposed to benefits (Wallis, 2009).

However, fundamentally CBA and I-O (multiplier) analysis speak different languages. It is not possible

to derive a direct linkage between the outputs of CBA and changes in macroeconomic indicators, such

as GDP. CBA provides no direct information on such indicators.

Thus, projects which record a negative NPV (BCR below 1.0) may still produce increases in GDP.

Notwithstanding this incompatibility, we present the findings of our somewhat exploratory analysis as

an addition to the CBA.

10.2 We estimated a modest package of regional economic

impacts

We estimated the following three elements for the Northland, Port of Tauranga and split options:

• capital costs- effectively the construction component associated with infrastructure and

other physical structures

• employment- the jobs associated with the proposal (relocation)

• catalytic benefits- the relocation as a driver of productivity and attractor of firms and

associated labour.

Analysis of sub-regional distribution impacts within Auckland are not possible as neither the data nor

models have sub-regional resolution.

Short-term (construction) stimulus material, reflecting initial

expenditure; split option most impactful

The input-output/multiplier analysis done by EY for the Working Group was reproduced using

updated capital expenditure figures and extending the scope to the Bay of Plenty region.

Table 29 shows that the short-term expected impulse from construction (capital) expenditure ranges

from a low of almost $6 billion in Bay of Plenty to a high of $19 billion in the split Northport/Tauranga

option. Predictably, the value-added (essentially GDP) values are more modest. The employment

impacts (FTE job numbers) are significant. Most of the impact will occur in the ten-year period

between 2030 and 2039.

Table 29 Results from input-output model for period 2020-2079 (nominal $m)

Initial spend ($m) Output ($m) Value Added ($m) Jobs (FTE #’s)

Officials Calibrated Officials Calibrated Officials Calibrated Officials Calibrated

Northland $8,105 $11,452 $11,903 $16,712 $4,148 $5,842 44,467 61,903

Bay of Plenty $3,947 $6,901 $5,953 $10,336 $2,347 $4,142 23,244 41,293

Split option $10,137 $12,731 $15,205 $19,033 $5,544 $6,968 56,564 70,904

87

Across the entire 60-year period where capital expenditure takes place, the total boost in economic

activity (direct, indirect and induced effects) ranges from a low of almost $6 billion in Bay of Plenty to

a high of $19 billion in the split Northport/Tauranga option. Predictably, the value-added (essentially

GDP) figures are more modest. The employment impacts (FTE job numbers) are significant.

We point out that most of the impacts contained in the table will occur over a 10-year period,

between 2030 and 2039 (i.e. they are not enduring). These results as presented assume that all of the

impact is felt within the region, which is clearly not realistic but in the absence of any data on which to

allocate impacts across other regions, is the default setting. Ongoing effects shows impact greater in

Northland, but most of the impact would occur outside the region of port development

Ongoing effects shows impact greater in Northland, but

most of the impact would occur outside the region of port

development

Readily available evidence specific to port development is restricted to European studies, but does

point to positive impacts, though probably modest (Bottasso, Conti, Ferrari, & Tei, 2014; Rodrigue,

2020).

Growth in traffic volumes is not associated with significant employment with elasticity levels between

throughput and employment that are typically less than 0.05 jobs per 100 tons (Rodrigue, 2020). Using

an elasticity of 0.03 (i.e. for every 100 tons of additional throughput 0.03 jobs arise) and the estimated

tonnage once the transition is completed (11.3million – 15.7 million tonnes), we estimated that

between 3,075 and 4,273 jobs would be supported from the transfer of freight operations. These jobs

could be considered on-going in nature and would continue to rise in line with freight volume.

Using elasticities relating the change in tonnage at a port to GDP (Bottasso, Conti, Ferrari, & Tei, 2014),

Table 30 shows the estimate an annual change in GDP once the freight has fully moved. Table 30

shows that the effects of the impulse are greater outside the actual region where port development

takes place.

While the impact in Northland is larger than that for the Bay of Plenty in both relative and absolute

terms, that is to be expected given the incremental effect of Auckland’s previous freight operations on

the respective location. The incremental impulse on Northport’s tonnage is over four times that for

the Port of Tauranga, whereas Bay of Plenty’s GDP is only around twice that for Northland.

Table 30 Annual GDP impact (nominal $m)

Local (GDP share) Wider (GDP share) Total (GDP share)

Bay of Plenty $9-$26 (0.03%-0.09%) $43-$154 (0.15%-0.53%) $52-$180 (0.18%-0.62%)

Northland $18-$53 (0.14%-0.42%) $89-$319 (0.70%-2.53%) $107-$372 (0.84%-2.95%)

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One potential take-away from this work is that while relocation to Northport results in greater GDP

impacts, most of those could be felt in Auckland while the impulse from relocation to Port of

Tauranga could affect Waikato as well as Auckland, though more modestly.

More novel approach has potential, but hard to be definitive

In recent times, a movement away from more ‘mechanical’ approaches to estimation has started. The

approach highlights the role quality plays in regional attractiveness using two dimensions. The first is

quality of life (QL), which pertains the attractiveness of a region to live in, while the second is the

quality of doing business (QB), which mainly relates to the state of the regional labour market. The

intuition is that workers and firms choose to locate in places that differ in their rent, wages and

amenities.

Workers derive utility from the consumption of (tradable) goods and (non-tradable) housing and from

local amenities, and their consumption expenditure depends on local wages and rents. Firms earn

profits equal to the price of the goods they produce less the cost of labour and land inputs (local

wages and rents). Local amenities may raise or lower production costs (either through affecting

productivity or by directly shifting input costs, given a certain level of productivity).

As alluded to above, an important factor in this approach is labour supply, both in quality and quantity

terms. A worker’s optimal location choice is the city in which their utility is maximised given the local

wages, rents, and amenities. For firms, the optimal location is the city in which their profit is maximised

given those same factors (Motu Economic and Public Policy Research, 2018). As Motu (2018) put it:

A place with high rents but low wages must have amenities that

make it a nice place to live otherwise people would move

elsewhere & newcomers would not arrive (“sunshine wages”)

A place with high rents and high wages must have amenities

that make it a good place to do business otherwise firms would

move elsewhere & new firms would not be established

(“productive”)

Table 31 contains measures of QB and QL for the settlements relevant to this analysis. Tauranga is

relatively rare in that it has positive values for both QB and QL, which suggests it would be attractive

to people and businesses. Whangārei on the other has negative measures for both. Auckland is a

mixed picture, performing strongly on quality of business but much less so on quality of life.

The key question is the extent to which relocation of freight activities would improve the quality of the

labour supply (and hence spur development). Unfortunately, this remains largely unknown and was

not able to be explored. We do see though, that Tauranga appears primed to exploit any

opportunities that come its way in terms of attracting people and businesses.

While there appears to be a degree of stickiness in quality measures (i.e. places with low (high) quality

in one or other dimension tended to continue to have low (high) quality measures in future) though it

is possible to change over time. The question is still open in respect of the effect of a relocation of

port activities.

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Table 31 Measures of QB and QL

Quality of life Quality of business

Tauranga 0.28 0.66

Whangārei -0.36 -0.53

Auckland -0.81 2.28

Source: Motu 2018

10.3 Social analysis not ‘full-blown’ impact analysis, but

identifies gaps, areas for further work

The focus of the social analysis was on gaps and areas where future work would be helpful, once a site

has been chosen. Use of social analysis to choose a site was not feasible within the constraints of time

available.

The key points made were:

• maintaining social license is increasingly important for ports worldwide and environmental

issues are at the forefront of concerns

• social considerations are pertinent throughout the entire port lifecycle from proposal,

commissioning, construction, operation, decommissioning

• social changes relevant to relocation of port activities include community participation,

labour force impacts and opportunities, communications, interactions with landscapes,

environmental factors and land values

• issues requiring further investigation include poor planning, displacement, poor

construction and delays.

Overall, the initial work provided some food for thought around how important it is for ports to create

and maintain social license. While a range of site-specific features and characteristics of the local

populations was identified, it was too difficult to be definitive about relative rankings in this analysis.

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11. Financial implications for port owners

This section explores whether there is enough financial incentive for ports to take up options without

Government intervention. This summarizes a detailed valuation report and financial model prepared in

March 2020 by Sapere Valuation. Close examination of that report and model is recommended if the

reader requires a full understanding of findings.

In undertaking this analysis, we have considered whether an investment in a new or expanded port is

a worthwhile financial investment. We do this by comparing the present value (PV) of the costs

associated with future port expansion to the marginal enterprise values (EV) achieved when a port

captures Auckland’s freight.

This section examines the commercial motivations of the shareholders of the Upper North Island

ports; not their social motivations. The land values associated with alternative uses for the Ports of

Auckland are complex, and Auckland Council is likely also to be motivated by the prospect of a

different waterfront layout more than they are a dividend cheque. These non-market motivations

(associated with changes in leisure amenity, for example) are not included here.

To calculate EV and PV of costs we have applied an appropriate nominal, post-tax discount rate with

reference to POAL’s weighted average cost of capital (WACC) of 5.2 per cent to 6.1 per cent (mid-

point of 5.8 per cent).

11.1 POAL is worth almost $1 billion to Auckland Council

It is in the commercial best interests of POAL (and by extension its shareholder, Auckland Council) for

the Ports of Auckland to remain in place. Left alone, POAL will continue to invest in automation and

future three-berth capacity. This will allow it to expand operational capacity and avoid congestion in

the short or medium term.

To calculate EV and PV of costs we have applied an appropriate nominal, post-tax discount rate with

reference to POAL’s weighted average cost of capital (WACC) of 5.2% to 6.1% (mid-point of 5.8%).

Our enterprise value modelling has shown that displacing the Ports of Auckland’s freight creates a

$938 million financial disadvantage for Auckland Council relative to remaining in place. This financial

disadvantage is established by comparing enterprise valuations for POAL under two scenarios: cease

or stay. This difference assumes that Auckland Council can release the market value of POAL land, at

full sales valuation.

Our estimate of the current market value for the entire business enterprises of POAL in Table 32 below

is based on the alternating assumptions that a) the status quo is retained or b) that POAL’s exit is

announced and implemented within eight years.

We assess the enterprise value of POAL’s port operations is approximately $2.1 billion. If these

operations are expected to cease in eight years’ time, the current market value of the enterprise would

be reduced to approximately $353 million. (This latter figure assumes a total cease of the port,

including marine service and cruise ship operations, and is the amount associated with the remaining

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eight years of life of the port). This implies a foregone enterprise value of approximately $1.765 billion

(being $2.1 billion less $353 million).

Table 32 Conclusions on market value for POAL (PV, $m)

Status quo

Freight ceases at

Waitematā Harbour

Enterprise Value as a seaport 2,118 353

Plus market value of the land if POAL continues as

landowner after 8 years 827

Sub-total for POAL 2,118 1,180

Source: Sapere

POAL and thereby Auckland Council would, however, retain the land (with an indicative market value

of approximately $827 million) which would partly offset the foregone enterprise value. The result is

such that Auckland Council would be worse off by approximately $938 million (being $1.180 million

less $2.118 million). We test this assumption later in this section.

11.2 POAL profit and dividend to Auckland Council

POAL profit is established using publicly disclosed financial information. Dividend information is more

difficult as Auckland Council does not disclose the detail surrounding its investment in POAL but

instead groups its investment in POAL with several other subsidiaries. POAL’s comprehensive income

is detailed below. Table 33 sets out POAL’s comprehensive income which belongs to Auckland

Council. 20

20 The financial analysis highlights that:

(a) AC is the beneficial owner of POAL’s annual ‘comprehensive income’. Comprehensive income consists of (a)

NPAT and (b) other income such as revaluation changes in POAL’s assets or financial instruments that it is a party

to.

(b) During FY16 to FY19, POAL’s NPAT averaged $68.8 million per year and other income averaged $42.6 million

per year resulting in an average comprehensive income of approximately $111.4 million per year.

(c) From this comprehensive income, a portion is paid out as dividends and a portion is retained in POAL (but

nevertheless remains AC’s equity).

(d) During the last four financial years, AC received dividends from POAL of approximately $48 million per year (or

approximately 70% of NPAT and 42% of Comprehensive Income). This dividend payout is expected to reduce for

the next two financial years as a larger portion of profit is expected to be retained within POAL for capital

expansions.

(e) POAL retains the rest of the comprehensive income as AC’s un-distributed equity (approximately $63 million

per year during FY16 to FY19). As at the end of FY19, the book-value of AC’s equity (the amounts not distributed)

was approximately $800 million.

(f) The conclusions in the valuations commissioned for this report implies that the market value of Auckland

Council’s equity in POAL exceeds its book-value and instead ranges from $1.656 billion to $2.091 billion ($1.854

billion at the mid-point).

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Table 33 POAL’s comprehensive income which belongs to Auckland Council (nominal $m)

FY16 FY17 FY18 FY19 Average

Net profit after tax 84 60 77 54 69

Other comprehensive income 68 30 43 30 43

Comprehensive income 152 90 120 84 111

Distributed as dividends 42 54 50 46 48

Retained in POAL 109 36 70 38 63

Source: Sapere, March 2020, using publicly disclosed financial information

If POAL’s port operations cease, the effect on Auckland Council’s financial statements would include a

cessation of the dividend stream after POAL has vacated the land, a cessation of some of the other

comprehensive income as it relates to port operations and port assets (excluding land), a continuation

of some of the other comprehensive income as it relates to land assets and recognising an

impairment write-down of Auckland Council’s investment in POAL.

The magnitude of this write-down is still to be ascertained more precisely, but the valuation analysis

approximates $195 million, set out fully in Sapere Valuation’s report (Sapere Valuation, 2020).

11.3 The present value of Auckland’s freight is $1.765

billion to another port company

We assess the present value of freight that would be moved from Auckland as $1.765 billion. If the

alternative ports are of reasonably similar efficiency and profitability, then the foregone enterprise

value of $1.765 billion could be expected to manifest as an increased enterprise value for the

alternative ports, to the degree they share in the increased revenues and they acquire the capital

assets necessary to facilitate their respective increases.

So, for example, if Port of Tauranga captures the entirety of Auckland’s freight, its enterprise value will

increase by $1.765 billion from its current assessed value of $5.1 billion. If, for example, Northport

captures the entirety of Auckland’s freight, its enterprise value will increase by $1.765 billion from its

current assessed enterprise value of $314 million.

11.4 Capitalised value of the infrastructure investment

varies up to over $4 billion

The $1.765 billion value uplift associated with moving Auckland’s freight is then compared with the

present value (PV) of the costs associated with future port expansion.

The costs associated with building or expanding a port to take Auckland’s freight were a key output of

the infrastructure workstream. The infrastructure costs include the cost of dredging, landside port

development and on-port moveable equipment. They do not include the cost of rail, bridge, tunnel or

road infrastructure required to support the port. In the case of existing ports like Tauranga, the costs

are adjusted so that they only reflect the additional investment required on top of what would likely

have been spent anyway. The infrastructure costs provided were in real (today’s dollar) terms.

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We make a set of assumptions about when capital spend will happen and other assumptions to allow

comparison across the port options. The result is set out in the table below and shows that the status

quo, unsurprisingly, has the lowest PV of port infrastructure investment.

Table 34 Present Value of port infrastructure investment required to handle Ports of Auckland freight ($m)

Status

quo

Tauranga Northport Northport

-Tauranga

split

Manukau

Harbour

(Central)

Manukau

Harbour

(Puhinui)

Firth of

Thames

Total real cost of

option

1,270 2,633 2,451 2,596 5,213 6,601 6,349

PV cost of option

2020s - 2050s at

5.8% WACC

608 1,031 1,176 1,253 2,930 4,435 4,092

Source: Sapere

11.5 New port options are not commercially viable

The cost of the new port options is substantially higher than the value uplift associated with taking

Auckland’s freight. That is, the expected PV cost is greater than PV benefit in the case of the Manukau

Harbour options and the Firth of Thames. For example, the Puhinui site in Manukau Harbour would

cost PV$4.4 billion while the value associated with the freight it would process is $1.765 billion.

To justify an investment of approximately $4.4 billion, a port at Manukau would need to handle

approximately 1.9 million TEU annually (versus Ports of Auckland’s current load of 940,000 TEU) and

would still need to grow annually at 2.3 per cent.21

The implication of this is a large proportion of Port of Tauranga’s existing freight volumes of 1.2

million TEU would be required to run through the new port options – scaling back Port of Tauranga

and making a regional monopoly.

Beyond that, decision makers face additional uncertainty including uncertainty associated with the

future freight flows, in relation to the realisable value of POAL’s land in Auckland and in relation to

land availability and social licence at each of the alternative locations. The implication is therefore that

fully private port investment in the new port options is unlikely.

21 Crudely calculated as 940,000 TEU ÷$2.1 billion x $4.4 billion. While there are some time-value considerations

which would spread the investment-cost over three years, the benefits would also be delayed for three years

before accruing to the project. As such, this estimate appears to be crude but conservative. We point out that this

is based on the growth forecast and profitability performance observed at POAL. If another port had higher

growth forecasts or better profitability performance, then the required freight volumes could be lower. This

calculation also disregards any other freight revenues such as freighting vehicles and marine services.

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11.6 The two-port model may be mutually advantageous

but at the cost of complimentary investment

The Working Group recommended the two-port model, splitting the freight load between Tauranga

and Northport. Practically speaking, this would require development to accommodate Auckland’s load

at Northport and letting Tauranga develop organically, as it would have done in any case. That would

include Metroport continuing, but only at the rate it would otherwise have done. From this valuation

perspective the two-port model is NPV-positive, meaning the cost of expanding both ports is less

than the benefit to be gained. 22

• The infrastructure workstream found that operating capacity extension at the Northport

and Tauranga port sites to support the two-port model will require investors to finance (in

real terms) $2.6 billion over the 60 years.

• In present value terms, the investment is $1.3 billion, with the Northport expansion

requiring the lion’s share of investment: just under three quarters of the $1.3 billion.

• By this investment, the Northland and Tauranga ports will be able to handle similar freight

volumes as Auckland would have, well beyond the 60-year term of analysis.23

• The first phases of port development at Northport will require a total (real) investment of

$1.1 billion with approximately $450 million required up-front for super-structures (Quay

cranes, automated stacking crane and straddles).

We note, however, that this scenario involves considerable other complimentary investment in

landside infrastructure and, also, leads to an inefficient national supply chain solution. Also, this

scenario assumes that freight traffic will flow to Northport

11.7 It is unlikely the three ports can work to find a solution

Whether a cooperative solution between POAL, POT and Northport is possible is a valid question to

ask. The answer is, however, that it is unlikely.

• POAL would need to be paid at least $938 million to entice it to cease operations (a “pay-

off”). If POAL was a strong negotiator, and there were other potential buyers for the port

operations, it is possible that it could negotiate for a higher price to cease because it

would know that the buyer of the port freight gains a benefit of $1.765 billion for the value

of the freight.

22 From a market perspective, investment in Northport may be considered high risk for investors as market

sounding suggested that the distance to Northport from markets make it a relatively more expensive option than

Tauranga and growth in markets was expected to occur more quickly in Waikato than North of Auckland.

23 If Northport was successful at capturing all of Auckland’s freight volumes (and PoT took none) then operational

capacity at Northport will be reached by the 2050s (Advisian, 2020); a more realistic scenario is that Auckland’s

freight load will be shared with PoT, and operational capacity will remain available at Northport until well beyond

the 60 year forecast term.

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• Based on the PV of cost of $1.3 billion, there is no configuration under which POAL, POT,

Northport working together or separately would invest in a project to expand capacity at

both or either of Northport or Tauranga. This is because the cost of expansion plus the

amount needing to be paid to POAL is less than the value of the additional freight traffic

that the parties would capture ($1.765 billion).

• Similarly, POT and Northport would not autonomously make an investment decision (i.e.

without the involvement of the other parties): they would not invest in capacity and pay

POAL to cease operations in Auckland.

• In the case of POT making the investment decision independently, the required expansion

investment to house Auckland’s freight is $1.13 billion. Due to the size of this investment, a

deal with POAL to cease Auckland freight will be infeasible even if POT captures the entire

Auckland freight load.

11.8 The land value released to Auckland Council may be

lower than expected

The working group estimated undeveloped POAL land to have a value of approximately $1 billion (as

set out in the Port Future Study of 2016). The value assessment in the analysis above is based on a

conclusion from a valuation expert of a range of between $701 million to $911 million (midpoint $827

million). This valuation is a present-day market valuation of 43 hectares of cleared, developable port

land made available in eight years.24

The concluded mid-point of $827 million land value does not provide an indication of the non-market

values that Auckland Council or others might attach to the port land. It does not assume the identity

of the buyer - only that there is a willing buyer and seller - although we are aware that there are

entities that have expressed an interest in the land should it be made available for sale. The figure

does not assume there is in fact a sale, only that the land has a residual value to POAL as an asset.

The mid-point value $827 million is approximately $447 million more than the value assessed by

management and CBRE in their latest assessment of the market value of POAL’s freehold land. The

concluded mid-point is approximately $173 million less than the $1 billion assessment set out in the

Port Future Study and referred to by the working group.

Planning analysis has also indicated that considerable uncertainty exists around the ability for Ports of

Auckland to quickly sell the ~43 hectares of available land under Ports of Auckland to a development

company. There is potential, for example, for legal challenge regarding the land’s status which may

mean a land sale is blocked while respective rights and interests are resolved.

Further, there are substantial development costs needing to be incurred before value in alternative use

can be released. From Auckland Council’s perspective:

24 No reference is made in the working group’s report of 9 August 2019 as to the net developable land expected

to be available from the POAL site. JLL’s report of 2016 assumed this would be approximately 34.1Ha, while CBRE

assumed 43.0Ha. The valuation above adopts the 43.0Ha proposed by CBRE. The rest of the land (34.0Ha) is

assumed to be converted to public spaces, roading and other assets owned by Auckland Council (AC).

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• It will likely, as for Wynyard Quarter, pursue a sale by leasehold. Punuku’s experience of

this development is the cost of land remediation and preparation is substantial and equal

to the value of the lease.

• Any costs involving a direct private benefit will, as much as possible, be funded by the

developer not the Council.

• Any additional rating value will be offset in costs of delivery of services of a public good

nature including three waters, establishing a new train station and other service delivery

suited to an intensive, inner city suburb.

In short, the land valuation will be seen by Auckland Council as spent already. Thus, with lower values

attached to the land the difference between the cease and stay scenario is larger, and the “pay-off”

required to compensate Auckland Council for a move might be $1.8 billion.

11.9 All scenarios reduce competition but one

We have considered the potential impact on competition of alternative options for handling sea

freight currently shipped via the POAL. A reduction in competition would reduce the discipline that

drives firms to adopt the most cost-efficient means of supply, redirect resources to profitable use,

provide cheaper and better products, and curb excess returns.

Our analysis follows broadly the approach the Commerce Commission might take in assessing the

competitive effects of any application to approve a merger or acquisition. We take this approach

because most of the scenarios would entail some form of arrangement or understanding between

entities that might otherwise be in competition with each other. At its core, the Commerce

Commission will compare the expected change in competition under a proposed arrangement with

the level of competition that would occur if the arrangements did not proceed, and this is the

approach we follow.

The Ports of Auckland and Port of Tauranga currently compete for ocean freight in the Upper North

Island. As the Port of Tauranga has influence over the governance of Northport, these ports are ‘one

head in the market’ from a competition approach the Commerce Commission might take. The existing

market therefore has characteristics of a duopoly—a situation in which two suppliers dominate the

market for a service.25

Each port intensifies its competitive offering via inland freight hubs:

• the Port of Tauranga has a hub in Auckland (Metroport), and is in partnership with Tainui

to develop a hub in Hamilton

• the Ports of Auckland has hubs in Waikato, Wiri, Bay of Plenty and Manawatu.

25 The Port of Tauranga owns 50% of the shares in Northport and of the four Board members one is the CEO of

the Port of Tauranga and another the Chair of Port of Tauranga’s Board. These relationships mean that the Port of

Tauranga is likely to be considered to be associated with Northport (in terms of s.47(3) of the Commerce Act) and

therefore, for the purposes of competition analysis, are in effect a single entity. The Ports of Auckland holds a

20% share in the company that owns the other 50% of Northport. It is unlikely that this ownership interest would

enable Ports of Auckland to exert a substantial degree of influence over Northport.

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Consistent with economic theories of capacity competition between duopolies, market shares of

imports and exports are inversely related to the total costs to importers and exporters from utilising

supply chains via Auckland or Tauranga. In simple terms, shippers use a port less if a supply chain

costs them more. As a result, we currently see a higher proportion of:

• containers are exported via Tauranga, due to the proximity of exporting producers

• containers of manufacturing goods imported via Auckland, close to distributors

• cars are imported via Auckland, as the majority of car dealers are in South Auckland.

Relative to existing arrangements, all but one option would reduce competition between ports in the

Upper North Island, to the detriment of New Zealand exporters and importers.26 Our analysis is

summarised in Table 35 below.

Table 35 Impact of options on port competition

Scenario -POAL freight moves to: Effect on competition Economic impact

Northport Substantial lessening of

competition, Upper North Island

higher prices, reduced service and

innovation

Tauranga Substantial lessening of



innovation

New port, fully owned by Tauranga Substantial lessening of



innovation

New port, fully owned by Auckland Increase in capacity competition lower prices, improved service and

innovation

New port jointly owned,

competing operators

Substantial lessening of

competition in ports, competition

retained for terminal operation

On balance, higher prices, reduced

service and innovation

We consider whether greater cooperation between New Zealand ports, increasing their market power

in negotiations with shipping companies, would be a benefit to New Zealand. Shipping firms are on

the ‘buy’ side of the market—the shipping companies purchase port services on behalf of New

Zealand exporters and importers. To the extent shipping lines have market power, it is ‘countervailing

market power’ to that of the port companies; this countervailing market power means that the

shipping companies would be able to negotiate better terms with the ports than otherwise and some

of that benefit would flow to exporters and importers.27

If port companies in the Upper North Island were to gain additional market power, that market power

would allow them to raise prices above those that would occur in the base case. These price increases

26 Our analysis was based on competition impacts with no change in regulatory structure. So absent regulation,

even if there were efficiencies there would be a lower level of competition (and therefore higher prices and

reduced service and innovation) than in a market with two strongly competing ports. This is explained in more

detail in the competition report. 27 Our comments are consistent with the Productivity Commission’s findings – see detail in the competition

report.

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can be expected to largely be passed through to New Zealand exporters and importers. The standard

Cournot model of competition, would predict increases in port charges of 6 to 32 per cent, relative to

existing charges at the Ports of Auckland, and 5 to 24 per cent relative to existing charges at the Port

of Tauranga. A consistency of assumptions logic might suggest that exporters and importers may face

price increases toward the higher end of this range under the scenarios that give rise to increased

market power.

Indicative price effects

We apply a Cournot model of competition to provide indicative estimates of the price impacts of

reduced competition for port services in the Upper North Island. The estimate is developed by making

several simplifying assumptions. As with the competition assessment above, the estimates presented

in this appendix are also ‘broad brush’.

The model takes in the existing market shares between the Ports of Auckland and the Port of

Tauranga and assumes a coordinated arrangement between the ports in the future (that is, an

effective port monopoly for shipping containers in the Upper North Island). We assume a price

sensitivity of demand for imports and exports of -2.5 to -3.5). Table 36 shows predicted percentage

increase in prices, as a result of reduced competition, relative to existing charges at the Ports of

Auckland Port of Tauranga:

Table 36 Price changes implied by reduced competition

Price elasticity of demand -2.5 -3.5

Percentage price increase—Auckland 38% 29%

Percentage price increase—Tauranga 29% 17%

11.10 Government funding and financing

The brief did not extend to considering detailed financing options. We were, however, asked to

provide an indicative scoping of the likely investment required from central government under each of

the options. The working assumption is that local government and/or private investors finance the

port infrastructure and consenting costs, and central government finances complementary rail and

road infrastructure, and any other costs required to facilitate the investment. Central government

would also shoulder any costs associated with preparing enabling legislation, if needed.

The figures below provide a broad, summative indication only. The analysis did not extend into

evaluating how the government might share the cost of road or rail with private entities, in public

private partnerships or through tolling or levies for example. Detailed feasibility analysis is a proposed

next step.

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Complementary investments in rail and road likely paid for

by the Crown

The infrastructure workstream concluded that substantial government investment in road and rail will

be required to support the expansion in both Northland and Tauranga.28 Road and rail are

complementary investments to a port, and as such, port companies and their shareholders rely on

signals from the government about when and where road and rail investments will occur. Planning for

complementary road and rail would need to run concurrently with the port planning, risking delays to

opening. If road and rail cannot be provided to support the expanded port at Northport, no mutual

arrangement will be able to be reached between Cornerstone Partners.

More detail on the configuration of road and rail options associated with moving freight by rail

between the locations is provided in the infrastructure findings.

Motivating Auckland Council to release the port

It is clear to us that Auckland Council has the most to lose from any of the options posed, if only

financial implications from its shareholding in the Port are taken into account. Also, it is clear that the

capital required does not justify moving the port on commercial grounds alone. This provides an

indication that some sort of incentive to move might be required.

Estimating the amount that might be required is challenging and speculative:

• A move of freight operations leads to a loss for POAL of $938 million (the financial

difference between cease and stay, with staying meaning a port restricted to 2.1 million

TEUs a year but operating in perpetuity).

• The land under the port is not easily sold and the loss to Auckland Council might be as

high as $1.8 billion. In the other direction, Auckland Council might value the social benefits

of moving the port so highly that it considers it has made no ‘loss’ at all from moving the

port.

• The required payout could therefore be anything in the range of $0 to $1.8 billion. It might

take the form of shares in the new port company, be paid in cash or in the form of other

transfers.

Crown funding of port development

If a new port were the chosen direction, it is likely the Crown would need to seek an innovative

funding solution. The Crown would likely need to carry the risk of the port being constructed

particularly given the consenting issues but, once constructed, there are an array of options for

28 The working assumption behind this analysis is that local government and/or private investors finance the port

infrastructure and consenting costs, and central government finances complementary rail and road infrastructure,

and any other costs required to facilitate the investment. Central government would also shoulder any costs

associated with preparing enabling legislation, if needed.

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financing. Long-term assets such as a port are much sought after by pension funds and other

perpetual investors.

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12. Supply-chain stakeholder perspectives

This section provides key stakeholder perspectives on the scope of this report. Two senior transport

specialists and Sapere undertook targeted consultation with key stakeholders across the supply-chain

including: shipping companies, ports, freight forwarders, a marine insurer and critical industry and

bulk importers.29 There is clearly a mix of views amongst these stakeholders and we caution about

taking these as representative of a full market sounding.

These discussions were undertaken to inform the analysis and economic modelling of this study with

real world perspectives and insight into likely market reactions from proposed relocation of POAL.

Discussions considered the current need for relocation, the benefits and constraints of alternative port

options and likely outcomes.

The key themes identified from engagement with key supply-chain stakeholders are noted below.

12.1 Northport does not make intuitive sense

Distance from and to market is critical as is avoidance of double handling where possible. Increasing

the length of the supply chain invariably increases costs. While many cities have relocated their port,

most moves have been within 50km. Northport is considered too far from main markets, especially the

growing markets and distribution hubs of South Auckland, Waikato and the Bay of Plenty, but also

from sizeable export markets. Stakeholders see that there will be additional cost and risk (e.g. of

product spoilage) from routing freight through Northport. Based on current freight flows, it is in the

wrong location where very little freight business is either generated or destined.

The extent to which this distance matters depends on the stakeholder. From a logistics perspective,

one interviewee indicated this transport cost was a small part of his overall cost. Others felt differently.

Rail transport may be suboptimal

The main rail line connecting Northland to Auckland is not straight and therefore slow. The distance

(approx. 200km) is just on the limit for what is generally considered optimal for rail freight.

Stakeholders believed international studies indicate road is more cost effective than rail for distances

less than 200km, while rail is preferred for the 200-500km range and coastal shipping (that requires a

Waitematā Harbour berth) for longer distances.

29 The supply chain stakeholders are not identified for confidentiality. This engagement was separate from

engagement undertaken by officials with iwi and Māori stakeholders (reported in (Ministry of Transport, The

Policy Shop, 2020) and cornerstone partners.

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12.2 Manukau’s proximity to land-side supply chain is an

advantage

While the harbour present challenges to operational capability that may be addressed, the shortening

of the supply chain is highly desirable.

This advantage may not be permanent

Land-side supply chain infrastructure is dynamic, shifting to follow cost efficiencies. The current

volumes of import cargo going to South Auckland, may be a result of historical practices and

influences rather than a sustained and/or distinct advantage. As an example, we note that the recently

established inland port and logistics hub in Ruakura is port neutral.

Perceptions of risk at Manukau

There are perceptions that Manukau has elements of risk attached to it, including distance from

shipping routes, poor weather and that the harbour entrance would make access uncertain and raise

insurance issues. Technical solutions include a tug station and dredged entrance channel, with annual

maintenance dredge volumes being comparable with those at Taranaki and Otago. It was

acknowledged that those issues could be tested empirically and are not resolvable until a full

feasibility study is completed. Discussions with shipping company representatives and a marine

insurer elicited the following points.

• The port consultant’s view, factoring in harbour master views on a Manukau container port

with a dredged channel and a tug station, is that shipping access to the harbour is a sound

concept unless proven otherwise by a full feasibility study.

• New Zealand insurance companies only insure the cargo, and there is no additional

premium for west coast ports. Container ships are international vessels insured by large

international insurers such as Lloyds. These insurers would be reactive to and go along

with a national decision if it is determined to be a feasible project.

• A shipping route from Australia and south east Asia to a container port on the Manukau

Harbour would work. A first stop would be to deliver imports to Auckland at Manukau,

then a vessel would head through Cook Strait to pick up exports from the South Island,

and then back up to the Port of Tauranga as the last stop to pick up exports before

departing New Zealand, as is currently the case, with Tauranga usually being the last port

of call.

• The uptake for a new port on the Manukau Harbour could play out like Sulphur Point at

the Port of Tauranga. Initial uptake may be slow, but shipping lines would assess the new

port to determine if it offers advantages e.g. avoiding other port calls. After one shipping

line becomes the first mover, other shipping lines will gradually follow, and it could

become accepted. The uptake by shipping lines would be strengthened if there is certainty

that POAL is going to close to freight activity.

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12.3 Firth of Thames is favoured by shipping companies

Shipping company representatives affirmed a preference for a new port at the Firth of Thames as an

alternative to POAL. It is thought the Firth of Thames option can viably co-exist with the Port of

Tauranga, from a shipping logistics perspective. The rationale is that a new port on the Firth of

Thames would be positioned to feed into South Auckland, Hamilton/Waikato and Tauranga/Bay of

Plenty and further south, handling imports and exports.

Positive container balancing and competition implications

There is a massive need for empty containers in Waikato making it logical to investigate a distribution

hub somewhere around Hamilton. Firth of Thames would also maintain competition for cargoes into

and out of the Waikato region.

12.4 Tauranga may provide port scale efficiencies

The small-scale, long-distance nature of the supply chain means that shipping is relatively expensive

into New Zealand and the business is finely balanced from a commercial perspective. To maintain

future cost competitiveness, shipping lines are moving towards use of larger vessels, where possible.

The move to a 9,000 TEU vessel is needed to consolidate freight, to be efficient in this small market.

Some supply chain stakeholders believe further development would give sufficient scale to Tauranga

to pursue operational efficiencies and savings. The countervailing challenge for Tauranga is the inland

movement of full containers north to Auckland and then empty boxes down south from Auckland with

capacity approaching limitations of the current train programme.

12.5 Reducing the number of ports raises concerns

The closure of POAL with business shifting to Tauranga and/or Northport results in what is essentially

a single owner. A potential outcome that several stakeholders expressed concern over.

If the competitive tension between POAL and POT disappeared, most stakeholders expect some cost

would be added to the total cost charged to the importer/exporter and ultimately the consumer. (See

also competition analysis in section 11.9.)

12.6 Shipping routes could adjust to any port option

Ultimately shipping lines are likely to call where the main ports are located, always preferring to take

the lower cost option.

12.7 General cargo and bulk will need to stay in Auckland

somewhere

General cargo typically arrives on ships like the “handisize” 30,000 tonne ships and sometimes the up

to 60,000 tonne “handimax” ships. The load is not enclosed in a container and the customer organises

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a fleet of trucks to run in a circuit to ensure the ship unload time is minimised. This general cargo is

carried by road.

After discussions with industry stakeholders, many companies exporting and importing bulk freight in

Auckland expressed significant concerns over the disruption to their supply chain and business if the

port was to be moved from POAL. The effect will be different for different products:

• Scrap steel bulk is a low margin product. There was a significant risk that the scrap steel

trade could cease altogether if the conditions following the port relocation were

unfavourable. Some companies involved in the trade indicated that subsidies could be

required for their business to continue to be viable.

• The effect on sand, ash and similar products is highly uncertain. It is already a burden on

New Zealand production to have to import them and extra transport costs from a remote

port would simply exacerbate the problem. One company implied that in such

circumstances it may cease to locally manufacture and instead opt to import the finished

product.

• Cement supply to Auckland by sea would cease. The industry states there would be a

considerable effect on price if cement is moved by road (as would likely be the case). Such

a scenario could result in up to 14,000 extra truck movements, and given cement is a key

element in the cost of concrete, overall construction costs could rise as a result.

• Finally, some edible goods companies raised concerns around their ability to stay

compliant with regulation and maintain the quality of their product if the port was moved.

Should conditions turn unfavourably following the port move, Aucklanders could see lower

quality products and, higher prices.

Overall, market discussions with industry found that around 65 per cent of all bulk (in terms of tonnes)

currently going through POAL could be significantly negatively impacted if the port is moved.

We recommend investigating the ability to keep berthage and yard space to allow general cargo to be

unloaded in Auckland.

Taking advice from an industry expert, in our modelling, we chose to only reduce bulk traffic of sand

and cement by between 50 per cent and 70 per cent and eliminate road metals/aggregates.

105

13. Resource consenting issues

We commissioned a high-level/ desk-top evaluation of the consenting constraints at each proposed

port site, examining the interplay of the relevant national, regional and district planning documents.

The environmental values under the New Zealand Coastal Planning Statement (“NZCPS” see Appendix

B).

The resulting evaluation explained how environmental values would bear on the ability to obtain the

necessary approvals required under the Resource Management Act 1991 (“RMA” or “the Act”). The

advice received also identifies the key risks and challenges associated with securing these approvals

and sets out high level consenting strategies for each site.

The planning evaluation included:

• A review of the relevant national policy documents prepared under the RMA, particularly

as they relate to development within the coastal environment.

• A review of other relevant documentation (including recent approvals under the RMA) in

order to assist in identifying the environmental values that might exist at each site.

• A review of the policy framework set out in regional policy statements, regional coastal

plans and district plans where relevant.

• A review of the consenting requirements set out in regional coastal plans and district plans.

The five sites were evaluated based on the infrastructure requirements summarised in section 5.2.

The evaluation found that establishing ‘greenfield’ port infrastructure will present considerable

consenting challenges – primarily considering the (unbalanced) expectations for the management of

environmental effects stemming from the NZCPS. A new port may need to be implemented through

legislation.

A detailed analysis of all the relevant objectives and policies has been carried out for each site and can

be found in the supporting papers provided to officials.

13.1 Assumptions

For the purpose of this high-level review, it has been assumed that some or all the following activities,

will be required for all the sites:

• Within the coastal marine area: land reclamation (scale dependent on location); occupation

of the coastal marine area; structures in the coastal marine area; construction discharges;

capital and/or maintenance dredging; disturbance of the foreshore and/or seabed; and

shipping activities.

• Land based activities: coastal port activities: in general, includes activities normally

associated with the operation of vessels and other water related activities; cargo, handling

and storage; embarking, disembarking and transit of passengers; launching, retrieval and

storage of vessels; berthage and mooring activities; associated marshalling, parking, and

manoeuvring of vehicles and trains, maintenance activities associated with port structures

and development; and ancillary activities to the above.

106

It is acknowledged that extensive road and rail connections to the sites will be required for some of

the options. For the new port sites in the Firth of Thames, considerable infrastructure upgrades are

likely to be required as there are currently no rail or state highway connections in proximity to these

sites. Any roading and rail connections to the established road and rail network has been considered

at a high level, reflecting the level of uncertainty about where these connections could be located.

It is noted that, given the linear nature of new road and rail infrastructure, it is plausible for this

infrastructure to be designed to avoid areas of higher environmental, cultural or social value. As such,

the location of required road and/or rail connections is not expected to be the determinative factor to

the evaluation of alternative sites – at least from a consenting perspective. Furthermore, it is noted

that road and rail infrastructure may be able to be authorised via designation (providing some

additional permitting flexibility).

Some matters have not been evaluated as being either less critical or subject to evaluations in other

reports: water servicing requirements (i.e. waste water, stormwater or drinking water supply), including

associated water takes and discharges; any air quality or air discharges; other activities, such as

storage and use of hazardous substances, contaminated land matters, natural hazards matters, and

transportation matters (such as access design, parking requirements); the economic viability or

otherwise of port development at each site; and the operational and functional suitability of the sites

for shipping purposes

13.2 Consenting expansion of Ports of Auckland

Existing ports including the Ports of Auckland are considered to present viable options for expansion /

enhancements of port facilities over 30-year time frame, subject to the appropriate management of

potential effects on the environment and Mana Whenua values. Being an existing port, the Auckland

Unitary Plan (“AUP”) already recognises the importance of the port through bespoke zoning and rules

which continue to provide for its ongoing operation and use. For works within the Port Precinct, it is

considered that seeking resource consents for the expansion works and associated activities fits

comfortably within the planning framework, albeit subject to a detailed assessment of the potential

effects of such activities on water quality, ecological values, amenity, noise and cultural values.

Recent developments by Panuku in the Waitematā Harbour have involved significant engagement

with Mana Whenua, and the resolution of issues relating to historical associations with the Waitematā

Harbour and the reclamation of the coastal marine area that is subject to applications under the

Marine and Coastal Area (Takutai) Act 2011.

The assumption that the port can expand according to its 30-year plans for additional yard capacity at

Fergusson Container Terminal and the conversion of Freyberg Wharf to container operations is

sustainable but there is much less certainty about the ability to expand further after 30 years. While

the amenity (and other) environmental effects arising from any future expansion proposal would

appear to be manageable when considered in isolation, it should be anticipated any proposed

expansion or enhancement of the port will draw considerable public interest and strong opposition

from a range of stakeholder groups (e.g. Urban Auckland, Stop Stealing Our Harbour and some Iwi). It

may be that perceived social effects, as opposed to biophysical effects, are unable to be avoided or

mitigated by any future expansion or enhancement of the port.

107

In summary, future expansion would not achieve ‘social license’ and would attract extensive

delays in the consenting process from appeals etc.

13.3 Northport expansion

The Northport site is located within the Marsden Point Port Zone in both the Whangārei District Plan

and the Proposed Northland Regional Coastal Plan. At present, there is port zoned land that is not

currently used by Northport. Port expansion activities to the south and south west will occupy this

port zoned land and may also occur in the Business 2 and Business 4 zones. The Northland Regional

Policy Statement is enabling of regionally significant infrastructure, which includes Northport. The site

is not located in any identified outstanding or high landscape and natural character areas. However,

the site forms part of the wider coastal natural character environment, and in particular Mair Bank,

which extends east of the oil refinery is identified as a High Natural Character Area.

While the port (and port zoned area that is not currently developed for port use) is within the

Significant Marine Mammal and Seabirds Ecological Area, the significance of the ecological values in

this area were assessed as part of Refinery New Zealand’s resource consent application for dredging

within the Whangārei Harbour and surrounds in 2017. The outcome of this application demonstrated

that potential effects on threatened or endangered marine mammals could be appropriately

managed, and consent was granted. This previous application would suggest that any such potential

effects can be adequately managed / overcome (for example through the use of marine mammal

observers during construction).

For works within the Port Zone, it is considered that seeking resource consents for the expansion

works and associated activities fits comfortably within the planning framework, albeit subject to a

detailed assessment of the potential effects on such activities on marine mammals and sea birds, and

cultural values.

If dredging that affects Mair Bank is required (i.e. beyond the entrance to the harbour), this

activity could present significant consenting challenges, or barriers to consenting, due to the

directive provisions of the Proposed Northland Regional Plan (which give effect to the requirements

set out in Policies 11 and 13 of the NZCPS) relating to the management of ecological, cultural and

high natural character values in this area.

13.4 Port of Tauranga expansion

The Port of Tauranga, and more specifically, Sulphur Point, is part of existing and clearly defined Port

Zones in the Bay of Plenty Regional Coastal Environment Plan and the Tauranga City Plan, which

generally allow for a range of port type activities, within defined limits and locations.

Further to the above, the site is located within the Port Industry Zone (Figure 8) in the Tauranga City

Plan and the Tauranga Harbour Port Zone (Figure 9) in the Bay of Plenty Regional Coastal

Environment Plan. Proposed port expansion activities to the south and south west would likely occur

in the Active Open Space, Commercial and Industrial Zones. As such, expansion of port facilities at

Tauranga has been found to be a relatively straightforward proposition.

108

There is much less certainty about the ability to expand capacity to hold the entirety of the ports of

Auckland’s freight task than there is for expansion plans to hold a share of that capacity. This is

because if expansion is required toward the Southern end of the existing port there are potential

imitations to development (at height) arising from Tauranga Airport aircraft slope surfaces and

viewshafts to Mauao.30

Relocating the airport runway eastwards to potentially gain additional height capacity at

Sulphur Point has not been considered as part of this evaluation. Notwithstanding this, it is

expected that such a project would also have significant consenting challenges itself - particularly

given that it would reduce the buffer between the end of the runway and adjacent residential and

commercial areas.

The consenting issues associated with improvements and additional capacity to the bridge and

highway adjacent to Sulphur Point were not considered in the workstream and are not included in the

port consenting cost estimates. Improvements to bridge and road infrastructure would be consented

concurrently.

13.5 The Firth of Thames sites

There are two potential sites in the Firth of Thames: Kawakawa Bay and Waimaongō Point.

Both sites are located within the jurisdiction of Auckland Council. As a unitary authority, Auckland

Council undertakes the functions of both a regional and district council. All the relevant regional and

district planning requirements under the RMA, including the Regional Policy Statement for Auckland,

are contained within a single document – the AUP. The AUP was prepared subsequent to the NZCPS

being gazetted and is considered to give effect to the directive provisions of the NZCPS (specifically,

Policies 11, 13, and 15).

These policies direct Auckland Council to avoid all effects on outstanding natural landscapes

and features, and to avoid significant adverse effects on high natural character areas and

indigenous biodiversity and other seascapes. In addition, the requirements of the Hauraki Gulf

Marine Park Act 2000 require consideration, as the AUP directs that the management of the Hauraki

Gulf gives effect to sections 7 and 8 of the Hauraki Gulf Marine Park Act 2000. Section 7 of this Act

recognises the Gulf’s national significance and its life supporting capacity that provides for the

relationship with Mana Whenua and social, economic, recreational and cultural wellbeing of people

and communities. Thus, it is considered likely that designing a consentable port development in

either location will be very difficult.

30 The Specified Airport Slope Surfaces are a requirement of the Civil Aviation Authority.

These slopes must be kept free from objects or structures to ensure aircraft safety is maintained when operating

at low altitudes in the vicinity of an airport. Due to the proximity of Tauranga Airport, these surfaces impose

height constraints on activities and structures on Sulphur Point, particularly at the southern end where it is

located beneath the arrival and departure flight path. As these surfaces are fixed, there are generally few options

available for securing additional height allowance above these surfaces. This has an overall limiting function on

the extent to which future port activities can expand or be undertaken vertically, particularly at its southern

extent.

109

• Kawakawa Bay: It is considered that obtaining the necessary resource consents to

establish and operate a new port at the Kawakawa Bay site is unlikely to be viable. The

development includes a new reclaimed island of around 250 hectares, Construction of two

approximately 6km long new bridges to provide access to and from the port and two

breakwaters up to 1km in length. Limited dredging activities would be required, as would

the construction of transportation links. Parts of the coastline of the Kawakawa Bay site are

identified as having both outstanding natural landscape values and high natural character

values.

• Waimaongō Point: this site may be able to be designed and sited so as to avoid areas of

particular significance in the AUP, but the effects that emanate from construction and

subsequent modification to the coastal marine area are likely to be sufficiently adverse to

independently challenge parts of the objectives / policies of the plan. More detailed work

on construction methodology and specific mitigation strategies to address such issues may

assist to ameliorate some of these policy concerns.

13.6 Manukau Harbour sites

There are three sites on the Manukau Harbour that were examined: central Manukau Harbour, Hikihiki

and Puhinui. Of the three, and when compared to the Firth of Thames greenfield sites, the Puhinui site

has relatively fewer identified significant ecological and outstanding landscape and natural character

values to contend with. Notwithstanding this, the site is surrounded by areas of broadly defined

significant marine and terrestrial ecology, areas of outstanding natural character and areas of

significant value to Mana Whenua. Thus, obtaining the necessary resource consents to establish

and operate a new port anywhere in Manukau Harbour will present considerable challenges.

• Central Manukau Island Port site: this option consists of a new reclaimed island in the

central harbour, up to 250 hectares in area; dredging of the Papakura Channel;

Construction of a 9km long causeway to provide access between the port and the wider

Auckland Area; and the development of new transportation links between the causeway

and the existing transportation network.

Given the clear direction within the AUP provisions to avoid significant adverse effects on indigenous

biodiversity and other seascapes, it is considered that it will be difficult to design an option at this site

that will not generate such effects. For example, The Central Manukau Harbour holds values relating

to both indigenous species and migratory birds. Consenting is not expected to be viable without a

plan change. If pursued, this would involve rezoning land and coastal marine area to a port zone and

obtaining resource consents.

Undertaking a plan change to provide a port zone over the land and coastal marine area where the

port and associated infrastructure will be located will also not be without significant challenges. Any

plan change must give effect to the NZCPS and give effect to the relevant higher order provisions of

the AUP. Based on the evaluation of the environmental values present at this site, it is considered that

successfully promoting a plan change to rezone the site for port purposes is also likely to be difficult.

• Puhinui Island Port site: This option consists of the establishment of a new reclaimed

island, on the edges of Papakura Channel, Waokauri Creek and Puhinui Creek. The

110

proposed island port would occupy a footprint of approximately 250 hectares, and would

require dredging, construction of two bridges, and the extension of existing transportation

links.

This is the most consentable of the greenfield sites. Situated off the coast of the Puhinui Reserve

and Auckland International Airport, the site is located within the General Coastal Marine Zone. A small

area of Coastal - Minor Port Zone is located immediately adjacent to / within the site and provides for

activities associated with the existing LPG terminal. On land, the closest surrounding zones include a

mixture of highly modified and highly natural land uses, including Special Purpose (Airport and

Quarry) and Business Zones to the north, and Open Space type zones to the east.

The proposed site is surrounded by areas of broadly defined significant marine and terrestrial ecology,

areas of outstanding natural character and areas of significant value to Mana Whenua. For example,

the wider Puhinui site is located within six Significant Terrestrial Ecology Areas and six Significant

Marine Ecology Areas. These ecological areas occupy almost all the seaward area of the proposed

Puhinui site as well as the adjacent coastline. The intertidal banks and shellbanks near Puhinui Creek

are valued for their gently graded sand flats, which support dense populations of intertidal sand flat

organisms and provide an extensive feeding ground for thousands of international migratory and New

Zealand endemic wading birds, including a number of threatened species. Nearby are significant areas

of mangroves, including some of the oldest mangroves in the harbour. The saltmarsh impounded

behind the Puhinui shellbanks is one of the largest and least disturbed areas of saltmarsh remaining in

the Manukau Harbour. The saltmarshes support a variety of indigenous flora and fauna.

A plan change is considered necessary.31

Legislative change, allowing for alternative planning routes other than a plan change, could

also be pursued should this site be the preferred location for a new port. A description of the

possible alternative planning routes is provided below under the heading, “Alternative planning routes

require legislative change”.

• Hikihiki Island Port sites: This option involves establishment of a new reclaimed island on

the Hikihiki Bank, adjacent to the Papakura Channel. The proposed island port would

occupy a footprint of approximately 250 hectares, and would require dredging,

construction of two bridges, and the extension of existing transportation links. It is not yet

known where the bridges will connect with the surrounding land. Due to the proximity of

Auckland International Airport, the wider landward area of the site is generally well

serviced by established infrastructural networks and industrial precincts.

The site is considered to be more consentable than Central Manukau harbour as the ecological values

are already affected due to the proximity of nearby highly modified environments, such as Auckland

International Airport. The site itself is a natural seascape and forms part of the wider coastal natural

character environment.

31 If it proves viable to site and design the Puhinui port to avoid identified significant natural character and

landscape areas, the prospect of consents being obtainable is improved. If this site is chosen, finer grained

analysis of the numerous ecological and landscape values identified by our planning advisors will be required.

111

The proposed Hikihiki site is however located within two identified Significant Ecological Areas –

Marine 2. These ecological areas occupy a large portion of the Hikihiki Bank and relate to the intertidal

banks and wading bird habitats. The intertidal banks at the Hikihiki site are of ecological significance

and support some of the most diverse and abundant intertidal sand flat organisms in the Manukau

Harbour. The area is also an extensive feeding ground for migratory and endemic wading birds. These

areas cover the vast majority of the site. It is clear that the Hikihiki site is surrounded by areas of

broadly defined significant marine and terrestrial ecology, areas of outstanding natural character and

areas of significant value to Mana Whenua. Thus, the proposal will be confronted with significant

consenting challenges particularly given the clear direction within the provisions of the AUP to avoid

significant adverse effects on indigenous biodiversity and other seascapes.

13.7 Consenting costs and timeframes

Expert input has been obtained about the time required to consent the Port development at each of

the sites, and a guide to the costs associated with this process. Their estimates are based on the RMA

approvals processes for similar large-scale infrastructure projects. The timeframes are high level, and

assume that the plan change and resource consent applications will be prepared and processed

concurrently.

The experts have highlighted that timeframes for any High Court, Court of Appeal and Supreme Court

process are difficult to estimate and will depend on the circumstances of the case. A relatively

streamlined pathway through the High Court could take approximately one year, whereas if the case is

referred back to a lower order Court to revisit an earlier decision, this process could take two to three

years. The estimation of the costs (also in Table 2) for the RMA approval process includes:

• input into the design process by planners and technical experts who will be preparing

assessments of effects

• preparation of assessments of effects by technical experts, such as benthic, marine

biologists and terrestrial ecologists, coastal processes experts, acoustic engineers,

transportation engineers, landscape architects, cultural advisers, archaeologists, geologists,

economists

• preparation of the resource consent and plan change applications; Council/EPA processing,

including notification, hearing and decision

• applicant’s costs for the hearing

• applicant’s costs associated with an Environment Court appeal

• applicant’s costs associated with a High Court (or other Court) appeal.

The costs for each project will generally be greater in the first three – five years, as expenditure

associated with detailed design, consultation, option evaluation, the preparation of technical

assessments and hearings will likely occur within this period. The expenditure in later years, whilst still

significant, will be more likely linked to legal / appeal costs.

The costs, although significant, are minor in the scale of investment in ports that is likely to be

required under any scenario. Table 37 summarises consenting costs and timeframes by scenario.

112

Table 37 Consenting costs and timeframes

Base Case Northport Port of

Tauranga

A shared

increase in

capacity at

both

Northport

and Port of

Tauranga

A new port

on the Firth

of Thames

A new port

on the

Manukau

Harbour

Consenting

cost

$3 – 5 million

$3 – 6 million

$3 – 6 million

$3 – 6 million

$7 - $8

million

$7 - $ 8

million

Consenting

timeframes

5 - 8 years 5 - 8 years 5 - 8 years 5 - 8 years 8 – 10 years

if possible

7– 9 years

CBA input $4.5 million

incurred in

decade 2020

– 2030

$3 million

incurred in

decade 2020

– 2030

$3 million

incurred in

decade 2020

– 2030

$3 million

incurred in

decade 2020

– 2030

$7 million

incurred in

decade 2020

– 2030

$7 million

incurred in

decade 2020

– 2030

13.8 Directive policies in the NZCPS almost prevent new

ports in the identified locations

These findings from the land use planning evaluation highlight that there are some significant, if not

insurmountable, challenges in obtaining the necessary RMA approvals for new port

developments in the coastal environment under the current legislative scheme. For the most

part, these issues are the result of:

• The policy statement sitting at the top of the order, being the NZCPS, includes language

that directs that adverse effects on certain environmental values are avoided

• The Supreme Court’s decision that the use of terms such as “avoid” have an ordinary

meaning of “not allow” or “prevent the occurrence of”32 and do not allow for a broad

overall judgement of both the positive and adverse effects when assessing the merits of an

activity.33

The NZCPS does not replicate that directive policy language when it turns toward recognising and

providing for the development of infrastructure such as port facilities. This means that the directive

policies of protecting indigenous biodiversity (NZCPS Policy 11), preserving natural character (NZCPS

Policy 13) and protecting natural features and landscapes (NZCPS Policy 15) effectively trump the

more generally expressed enabling policies that apply to such things as infrastructure and port

development.

32 Note that decision makes exceptions for minor or transitory effects, however the nature of effects likely to be

generated by a new greenfield port development are assumed to extend beyond minor or transitory. 33 Environmental Defence Society Inc v The New Zealand King Salmon Co Ltd [2014] 1 NZLR 593.

113

In recent years, the interpretation of the NZCPS provisions, particularly Policies 13 and 15, has been

extensively litigated in the Courts. The most significant of these being the Supreme Court decision

Environmental Defence Society Inc v The New Zealand King Salmon Co Ltd [2014] 1 NZLR 593. In this

decision, the Supreme Court found that the use of terms such as ‘avoid’ has an ordinary meaning of

“not allow” or “prevent the occurrence of”. As a result of this interpretation, the language used within

Policies 11, 13 and 15 (being as directive as it is) therefore effectively establishes ‘bottom lines’ as the

policies all seek to avoid (i.e. not allow or prevent the occurrence of) certain effects in the interests of

protecting indigenous biodiversity (Policy 11), preserving natural character (Policy 13) and protecting

natural features and landscapes (Policy 15).

Against the backdrop of this jurisprudence, subsequent experience has shown that the NZCPS (and

plans prepared post the gazettal of the NZCPS) can present some significant consenting challenges

for any new development in the coastal marine area – regardless of its merits or community benefits.

In places of outstanding or high natural character or landscape value, or where ecological values are

significant, the ‘avoid’ language in Policies 11, 13 and 15 (and the policies in corresponding lower-

order plans) can effectively act as a bar to consents being able to be obtained.

When applied to the current context, most greenfield sites in the coastal marine area are likely to

exude significant natural, ecological and / or landscape values, meaning that their level of policy

protection is elevated within the NZCPS. This effectively amounts to a policy underpinning of

considerable disadvantage for the proponent of any new port infrastructure of scale within the coastal

marine area.

In addition, port authorities are not able to designate land to enable the development and operation

of port activities in district plans. This is somewhat at odds with the situation available for other

operators of significant infrastructure, such as airports, network utilities, water utilities and state

highways. This means that the proponents of new port infrastructure must rely on resource consents,

which can be multifaceted and complex, and which rely on a high level of certainty at the outset as to

what is to be built, in order to authorise the land use activities associated with ports.

The current proposition that freight activities might be relocated away from the Ports of Auckland and

replicated at another location is somewhat unprecedented in the RMA era. This analysis has revealed

some of the challenges confronting a future applicant, if it is decided to pursue an alternative site to

provide for port infrastructure, particularly where the preferred site falls within the coastal marine area.

13.9 Alternative planning routes require legislative change

A few mechanisms have been considered to assist in bridging the current lacunae. These mechanisms

include:

• Allowing the new port sites to be designated in District Plans.

• Amending the NZCPS to be more enabling of new regionally or nationally significant port

development and qualifying how the “avoid” policies relate to such infrastructure (i.e. by

providing for some exceptions to the requirement to avoid adverse effects and / or

significant adverse effects for nationally significant infrastructure).

• Enacting special legislation that establishes a bespoke planning approval process for new

port development in an identified location. The special legislation could establish a

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bespoke, one-off planning approval process for the new port development in an identified

location. The special legislation would ideally override all other legislation that affects the

planning authorisation process and provide a fast track process for obtaining the necessary

authorisations for the development and its ongoing use. Once the necessary approvals are

in place, the special legislation would terminate, then future works at the site would revert

to being governed by the relevant local authority and the district and regional / unitary

plans.

115

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Treasury . (2015). Guide to Social Cost Benefit Analysis.

Wallis, I. (2009). Economic Development Benefits of Transport Investment. NZ Transport Agency

Research Report 350.

117

Appendix A: Economic analysis comparisons Table 24 in section 8 provided a comparison of costs and benefits between the current economic

analysis with that produced for the Working Group. The tables in this appendix provide the same

comparisons for Tauranga, Firth of Thames and split Northport and Tauranga. The Working Group did

not include the Manukau in its economic analysis.

Table 38 Comparison with Working Group findings for economic analysis of Tauranga (PV, $m)

$m Sapere Working Group/EY Difference

User costs: Rail $1,285 $160 $1,125

User costs: Road $2,010 $1,583 $426

Congestion $16 $135 -$119

Emissions $198 $31 $167

Safety $109 $30 $79


Total operating costs $3,723 $1,939 $1,784

Port Capacity Investment $430 $330 $100

Rail transport investment $123 $3,090 -$2,967

Road transport investment $386 -$1,448 $1,834

Total capital costs $938 $3,420 -$2,482








Total benefits -$957 -$2,172 $1,215

Total costs $4,661 $5,506 -$845

BCR 0.21 0.39

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Table 39 Comparison with Working Group findings for economic analysis of Firth of Thames (PV, $m)


User costs: Rail $459 $139 $321

User costs: Road $77 -$1,130 $1,207

Congestion -$51 -$96 $45

Emissions $31 -$22 $53

Safety $16 -$21 $37



Port Capacity Investment $2,242 $3,256 -$1,014

Rail transport investment $3,403 $890 $2,514

Road transport investment $1,132 -$2,282 $3,414









Total benefits -$1,009 -$4,276 $3,268

Total costs $8,303 $4,431 $3,871

BCR 0.12 0.97

119

Table 40 Comparison with Working Group findings for economic analysis of split Northport & Tauranga (PV, $m)


User costs: Rail $1,123 $211 $912

User costs: Road $2,124 $208 $1,915

Congestion $60 $18 $42

Emissions $202 $4 $198

Safety $113 $4 $109



Port Capacity Investment $599 $514 $85

Rail transport investment $1,965 $1,329 $637

Road transport investment $1,012 -$27 $1,038









Total benefits -$957 -$751 -$206

Total costs $7,804 $2,435 $5,369

BCR 0.12 0.31

120

Appendix B: CBA sensitivity analyses

Lower discount rate improves BCRs but worsens net benefits

Table 41 compares the core results for all options with the results from lowering the discount rate to 4

per cent for the Calibrated freight forecast. BCRs across all options rise, but the net costs to society

also rise for all options except Manukau. The lower discount rate sees both costs and benefits rise, but

the proportional change in benefits is greater than the proportional change in costs.

As the majority of benefits do not arise until much later in the analysis period (i.e. once freight

operations cease), the effect of discounting is felt more acutely on the benefits side. For the Manukau

option, the nearer-term capital costs rise but the ongoing operational costs, which are lower than

those of the status quo across the board effectively outweigh the rise in costs over time and hence net

costs reduce considerably, to just over a billion dollars.

The best performing option (Manukau) now has a BCR of 0.752, which while still beneath ‘break even’,

has risen by around 70 per cent, from 0.443 with a 6 per cent discount rate. Benefits for this option

almost doubled, while costs grew by just under a quarter.

Table 42 shows the same pattern emerges for results using the Officials’ agreed freight forecast.

We do not report the results for a higher discount rate assumption (i.e. eight per cent), but

qualitatively the same results are found.

121

Table 41 CBA lower discount rate sensitivity results, Calibrated forecast, PV, $m


Northport and

Tauranga Manukau

6% 4% 6% 4% 6% 4% 6% 4% 6% 4%

Total benefits $957 $2,019 $957 $2,019 $1,009 $2,125 $957 $2,019 $1,579 $3,290

Total costs $7,209 $11,524 $4,661 $8,716 $8,303 $10,655 $7,804 $12,325 $3,561 $4,376

Net benefits -$6,252 -$9,505 -$3,703 -$6,697 -$7,294 -$8,530 -$6,847 -$10,305 -$1,982 -$1,087

BCR 0.133 0.175 0.205 0.232 0.121 0.199 0.123 0.164 0.443 0.752

Table 42 CBA lower discount rate sensitivity results, Officials’ agreed forecast, PV, $m


Northport and

Tauranga Manukau

6% 4% 6% 4% 6% 4% 6% 4% 6% 4%

Total benefits $957 $2,019 $957 $2,019 $1,009 $2,125 $957 $2,019 $1,384 $2,872

Total costs $5,878 $8,621 $3,168 $5,525 $7,930 $10,082 $6,645 $9,653 $3,581 $4,489

Net benefits -$4,921 -$6,602 -$2,210 -$3,506 -$6,921 -$7,957 -$5,688 -$7,634 -$2,197 -$1,617

BCR 0.163 0.234 0.302 0.365 0.127 0.211 0.144 0.209 0.386 0.640

122

Higher discount rate worsens BCRs but improves net benefits

Table 43 shows that increasing the discount rate from the core value of 6 per cent to 8 per cent has

the opposite effect of lowering the discount rate on BCRs, which drop across all options.

In essence, raising the discount rate increases the ‘punishing’ effects of discounting on impacts further

out in time. This means that benefits reduce proportionally more than costs do, bringing the BCR

down as a result. Again however, the relativity between costs and benefits means that the effect on

net benefits (costs to society in this case) is more subdued.

Manukau remains the best performing option, but the BCR for the option is now 0.279 as opposed to

0.443 with a discount rate of 6 per cent (a fall of some 68%). Benefits fell by around a half, while costs

fell by around 24 per cent, leading to a fall in net costs to society of around 4 per cent.

Similar results are found using the Officials’ agreed freight forecast (see Table 44).

Table 43 CBA higher discount rate sensitivity results, Calibrated forecast, PV, $m


Northport and

Tauranga Manukau

6% 8% 6% 8% 6% 8% 6% 8% 6% 8%

Total

benefits $957 $475 $957 $475 $1,009 $501 $957 $475 $1,579 $796

Total costs $7,209 $4,853 $4,661 $2,688 $8,303 $6,462 $7,804 $5,331 $3,561 $2,855

Net

benefits -$6,252 -$4,377 -$3,703 -$2,213 -$7,294 -$5,960 -$6,847 -$4,856 -$1,982 -$2,060

BCR 0.133 0.098 0.205 0.177 0.121 0.078 0.123 0.089 0.443 0.279

Table 44 CBA higher discount rate sensitivity results, Officials’ agreed forecast, PV, $m


Northport and

Tauranga Manukau

6% 8% 6% 8% 6% 8% 6% 8% 6% 8%

Total

benefits $957 $475 $957 $475 $1,009 $501 $957 $475 $1,384 $700

Total costs $5,878 $4,216 $3,168 $1,951 $7,930 $6,185 $6,645 $4,802 $3,581 $2,824

Net

benefits -$4,921 -$3,740 -$2,210 -$1,476 -$6,921 -$5,683 -$5,688 -$4,327 -$2,197 -$2,124

BCR 0.163 0.113 0.302 0.244 0.127 0.081 0.144 0.099 0.386 0.248

123

Appendix C: NZ Coastal Policy Statement

The purpose of the NZCPS is to state objectives and policies in order to achieve the overarching

purpose of the Resource Management Act 1991 (RMA) in relation to the coastal environment.

The NZCPS contains a number of enabling policies that would assist the RMA approval process for any

of the coastal port options identified. However, the NZCPS also includes a range of policies which are

specifically directed at the protection, or avoidance, of adverse effects on, significant coastal values.

Policy 9 of the NZCPS specifically relates to ports. The policy recognises that a sustainable and

effective national transport system requires an efficient network of safe ports, servicing national and

international shipping, with efficient connections with other transport modes.

Reclamation activities within the coastal marine area are specifically addressed in Policy 10 of the

NZCPS. Policy 10(1) seeks to avoid reclamation unless (i) land outside of the coastal marine area is not

available for the proposed activity, (ii) the activity can only occur in or adjacent to the coastal marine

area, (iii) there are no practicable alternative methods (to reclamation) of providing the activity, and

(iv) the reclamation will provide significant regional or national benefit. It would be reasonable to

assume that all of the coastal port sites could demonstrate that the matters set out in this policy can

be met and that reclamation avoidance is not a practicable option.

Policy 11 addresses indigenous biodiversity. Policy 11(a) seeks to protect indigenous biodiversity

within the coastal environment by avoiding adverse effects on more sensitive areas of indigenous

biodiversity. By contrast, sub-paragraph 11(b) seeks to avoid significant adverse effects and avoid,

remedy or mitigate other adverse effects in less sensitive indigenous biodiversity. similar cascading

management approach is set out within Policy 13 with respect to natural character. Specifically, Policy

13(a) seeks to preserve natural character and protect it from ‘inappropriate use and development’ by

avoiding adverse effects of activities in areas of outstanding natural character. Policy 13(b) requires a

lesser level of protection for natural character areas that are not ‘outstanding’ and states that

significant adverse effects on natural character are to be avoided, and all other effects on natural

character are to be avoided, remedied or mitigated.

Policy 15 addresses natural features and natural landscapes. In line with Policies 11 and 13, the

cascading approach requires under sub-paragraph (a) that natural features and landscapes (including

seascapes) be protected from ‘inappropriate use and development’ by avoiding adverse effects on

areas identified as outstanding natural features and outstanding natural landscapes. Sub-paragraph

(b) requires that significant adverse effects on other natural features and landscapes (including

seascapes) be avoided, and all other effects on those features and landscapes be avoided, remedied

or mitigated.

124

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